check your calculations (HALIFAX Customers)

charlieMannor

All,

This is my first post, so bare with me. It was recently made very clear to me that you should check all the bank calculations. (Knowing what I know about Admiral insurance you should check you insurance calculations too).

It is pretty easy to do, I will show you below. But first, a quick story.

I recently opened a Halifax ISA account with transferred in money (Uprate your ISAs people!) They were offering a good 3.0% or 3.2% as I had a current account (if I had kept the account a year).

Sadly I had to cash in my entire ISA to pay my house deposit after just 66 days after first requesting the account.

Upon my closing statement I was paid about £40 for 66 days of a big house deposit (almost 15K). This was clearly not right, and a brief calculation later showed that for 66 days I should have received almost £80 pounds.

It took 45 minutes in my local Halifax to convince the lady that I can do maths and the interest was in fact wrong. Manager called etc and finally they agreed to escalate this as a complaint.

Bottom line is don't believe your interest rate calculations for ANTHING. You can also check your mortgage payments quite easily. I will try and build an excel document you can use to check your mortgage and savings interests.

Anyway on to the practical stuff. The calculations. Please note all these calculations are based on daily interest rates paid annually. Read your account terms and conditions to find out when interest is calculated and when it is applied. Most accounts are daily calculations and either monthly or annually applied credits.

Fixed deposit savings account:

Take the APR interest rate (e.g. 3.2% APR) and divide the number by 100.

3.2 / 100 = 0.032

You can now multiply your initial deposit by this number and it will tell you how much interest you should have earned in a full year.

e.g. £5000 deposit * 0.032 = £160 Interest in a whole year

But if you want to be super accurate work out how many DAYS you have had the account. e.g. April 9th to July 14 is 66 days.

First calculate the daily interest rate:

3.2% / 100 / 365 = 0.000087 (approx) but just don't clear your calculator to keep the number accurate.

Now multiply the complete number by the number of days you had the account

0.000087... * 66 = 0.0057.... again a long number keep that in the calculator.

Now multiply your original deposit by the number you have.

e.g. 5000 * 0.0057.... = £28.93 interest.

Now you can apply the same for accounts where you make additional deposits but to be completely accurate you have to calculate the interest you earn each period between deposits.

e.g.
Jan 1st: £100 deposit
Feb 1st: £100 deposit (£200 balance)
etc.

Just repeat the calculation above but for each month. So January has 31 days and a balance of 100 pounds (27pence interest based on 3.2%).

February the balance is £200 and 28 days (so 49pence interest).

If you get your interest paid monthly just remember to add the interest onto the account on the day it should be. Do this for the whole year (or the whole account period) and you will have an accurate reflection of your true interest.

Don't forget the bank may only owe you £5, but:

1) It is YOUR £5 not THEIR £5, I call that stealing.
2) They have MILLIONS of customers, these are HUGE amounts of money for them.

You can use the same calculations to work out how much money you OWE on your mortgage and how much interest they should be charging and how much your mortgage balance should be.

I firmly believe it pays to check.

If you are interested in me setting up an excel file to help with all these calculations please let me know and I will do it. The more people who want it the quicker I will do it:)

All the best,

C

opinions4u

So are you £5 out of pocket? £40 out of pocket?

Have they explained why it's wrong?

Can't really follow your post to be honest. Why include the extra 0.2% if you shouldn't get it?

If you could state the balances at each date there's a change, perhaps others could verify your sums. £15k for a year should be £450, so it seems reasonable to expect £80ish for a couple of months. But your post does little more than confuse at present.

For what it's worth, I can safely say that Halifax systems calculate interest accurately to the penny. If there's a problem, it's in the account designation (Halifax issue) or customer's maths.

Loughton_Monkey

Well I must say you have an interesting concept of the mathematics of interest!

If your maths were correct, you could take £100,000 to the bank at 3% interest, and get £103,000 back in exactly 1 year. OK. I'll go along with that.

But if your maths were correct, I would simply line up 12 banks - all at 3% interest. So I put the £100K in the first for 30 days, and get £3,000 times 30/365 = 246.58. Are you seriously suggesting I could then take £100,246.58 to the next bank for 30 days and receive another £100,246.58 times 30/365 = £247.28?

You may care to look up "Compounding" in the dictionary. You'll find it between 'Common Sense' and 'Crass'.

Linton

Your maths is wrong and confusing, but your conclusion is correct...

1) 3.2% per year means a multiplying factor of 1.032

2) a factor of 1.032 per year is 1.032^(1/365) =1.0000863 per day

3) So for 66 days the factor is 1.0000863^66=1.0057119

4) So for £15K deposit you should get 15000*0.0057119=£85.68 interest

Which makes your £40 rather surprising.

Is there something in the Ts&Cs about early withdrawal? I guess the £40 could be one months interest, perhaps the money was withdrawn before the second months interest was added?