Monthly and Annual interest rates warning

andyt8

I think more attention needs to be given to the reduction in interest rate that you get with some providers when opting for their monthly interest option.

For instance from a couple of providers that appear here quite often.

Newcastle Online Easy Saver:- Annual: 3.00% AER Monthly: 2.78% AER
Santander eSaver3 (inc bonus):- Annual: 2.90% AER Monthly: 2.86% AER

So Santander don't appear to apply any penalty - if you compound up your monthly rate of 2.86 you will get 2.90 whereas Newcastle apply a 0.2% penalty for taking the monthly option.

Personally if there is no penalty I like to see the interest coming in monthly (re-invested in same account) as it then makes it obvious when interest rates change.... its okay to miss a rate drop by a month but not by a year..:( Taking the monthly interest rate is also popular for those partially living upon their savings.


Andy

alanq

You are right to draw attention to this anomaly. USUALLY AER rates for annual and monthly interest are the same or very close. Occasionally there is a significant difference.

From Newcastle's website:
Annual -Monthly
"3.00% Gross/AER* - 2.75% Gross/2.78% AER*"
Clear but, as you say, with a penalty for receiving interest monthly.

Santander for esaver 4
"Annual
AER (inc bonus) 3.10%"
Fair enough. For annual interest AER and Gross are equivalent.

"Monthly
Gross pa/AER Inc(Bonus) 3.06%"
Incorrect. The monthly interest must be stated as either Gross pa or AER. It cannot be the same rate for both. If it is Gross pa paid monthly then that does indeed equate to 3.10% Gross pa paid yearly. If it is AER then Santander also penalises for monthly interest.

opinions4u

In fairness to Newcastle, they don't hide the fact.

http://www.newcastle.co.uk/savings/NewcastleOnlineEasySaver

The summary box clearly states 2.75% gross (2.78% AER) for monthly interest.

xx_Law_Grad_xx

alanq wrote: »

You are right to draw attention to this anomaly. USUALLY AER rates for annual and monthly interest are the same or very close. Occasionally there is a significant difference.

From Newcastle's website:
Annual -Monthly
"3.00% Gross/AER* - 2.75% Gross/2.78% AER*"
Clear but, as you say, with a penalty for receiving interest monthly.

Santander for esaver 4
"Annual
AER (inc bonus) 3.10%"
Fair enough. For annual interest AER and Gross are equivalent.

"Monthly
Gross pa/AER Inc(Bonus) 3.06%"
Incorrect. The monthly interest must be stated as either Gross pa or AER. It cannot be the same rate for both. If it is Gross pa paid monthly then that does indeed equate to 3.10% Gross pa paid yearly. If it is AER then Santander also penalises for monthly interest.

I have just opened an eSaver account with Santander and opted for monthly interest to be paid. As the interest is variable would it be safer to have it paid monthly instead of annually where the interest rate could be slashed?

[Deleted User]

Hi,

From Santander T&C's,

Interest payment: Interest calculated daily and paid annually or monthly on the anniversary of account opening.

Interest may be paid into the account or to another suitable Santander account.

YorkshireBoy

xx_Law_Grad_xx wrote: »

I have just opened an eSaver account with Santander and opted for monthly interest to be paid. As the interest is variable would it be safer to have it paid monthly instead of annually where the interest rate could be slashed?

No. Once you've accrued interest (as you do each day with all accounts) it's 'locked' in...even if they subsequently lower the rate.