Explain Interest please.

bobelliott

Hi Everyone.

I am thinking of investing some money with Yorkshire/Clydesdale Bank 2 year term deposit.
My question is that when the interest is added for the first year does the second year add interest on the whole figure or just the original capital that was invested.
Thank you for your help.
Kind regards.
Bob

atush

If it is a 2 year bond, it may only pay interest at the very end fo the two years. And it also depends on where it is paid. Many bonds if they pay our yearly before end of the term, pay out the interest to a linked acct- so not into the bond.

So in effect, it all dpends on the riles of your product so you will have to call them and ask.

oldfella

check the AER - this is the annual interest % - so the interest from the first year will get compounded by this amount

atush

Not if the interest is paid outside the acct into a linked acct. It will depend on the rules of the particular acct.

oldvicar

Yorkshire/Clydesdale do seem to offer product which pay simple interest - a bit naughty when most pay compound, although such products can have a place.

calypso_rhapsody

Yorkshire offer various options - if you select the annual capitalised interest option then interest is added at the end of the first year and calculated for the second year based on the increased balance. But you can choose to have the interest paid into another account monthly or annually and indeed you can choose to just have interest capitalised at maturity. The AER seems to be the same whichever you choose but the gross interest rate varies.

Interest is taxable in the year that you 'receive' it - that is that it is capitalised in the account or paid across to your other account - that could influence your choice (along with whether you need the monthly or annual income)

bobelliott

Hi Everyone.

Thank you all for your very helpful input.
Kind regards.
Bob.