Savings accounts & monthly interest

SilverSix

I have 3 savings accounts all paying roughly 3.1% AER, interest is paid monthly. Based on a variable rate + a bonus rate for 12 months.

I will be closing these accounts this month, I have had one for 8 months and the other two for just 1 month.

A colleague of mine is under the impression that upon closing the accounts they will 'take back' some of the interest paid as the interest is paid on the assumption the accounts will be active for 12 months.

Nothing jumped out at me in their small print and I have been receiving interest monthly. My logic was that each month I receive 1/12th of the interest (interest calculated daily) and that by closing the accounts early there would be no interest taken back by the banks?

Any help would be appreciated,

Thanks,

Ben

IronWolf

Nope they wont take back interest, they should in fact pay you the additional interest owed when you close the account.

JimmyTheWig

No reason for them to take back interest just because the accounts pay interest monthly.
But of course if there are terms and conditions on the accounts (e.g. no withdrawals for the first 90 days) then you will be penalised if you break them. But I would like to think that you'd know about that if that were the case.

SilverSix

JimmyTheWig wrote: »

No reason for them to take back interest just because the accounts pay interest monthly.
But of course if there are terms and conditions on the accounts (e.g. no withdrawals for the first 90 days) then you will be penalised if you break them. But I would like to think that you'd know about that if that were the case.

I'm fairly certain that they have no withdrawl or closing charges. If they do then I'll leave £1 in them until the period for charges has passed.

Marco12452

Close at any time you like and all interest paid for the months the investment was active will be honoured.
The issue would be that the 3.1% will include the 12 month bonus, so what you actually get in interest may not be what you are expecting. Usually 12 month bonuses range from around 1.5 - 2.5 % meaning the monthy cumulative interest to the 12 month mark would have been 0.6 -1.6 %, depending on the account and the deal offered. So for less than 12 months the cumulative interest would be even less than this. Then there will be tax to deduct from the interest too.

JimmyTheWig

I disagree, Marco. I would have thought that a 12 month bonus was a bonus that lasted for 12 months rather than a bonus that was only payable after 12 months.

calypso_rhapsody

Most bonus accounts pay the bonus as you go along but there are a few that only pay on the anniversary (or some other set date) ... check your T&Cs and if you are not sure, then leave £1. But your colleague is, as far as i am concerned, talking out of his a**e - they will not claw back interest that has already been paid to your account (for an instant access account).