How is interest calculated by banks?

new2012

I have £1001 in a savings account which pays 3% yearly with the interest paid once a year.

Therefore I would expect to have £1031.45 after one year, according to my excel spreadsheet, if no money was withdrawn.

If I was to transfer £1000 out of the savings account into a current account and then straight back again, once a month, both accounts are with the same bank, so money is transferred instantaneously, how much would I have in my savings account after a year?

The figure of £1031.45 is what my spreadsheet calculates I am not sure if the bank would get the same amount as they may not use the same formula as excel.

Lokolo

If the money always arrives by the end of the working day, the same. it's calculated daily on the end of day balance.

opinions4u

Don't forget to deduct income tax unless you've registered with the bank as a non-taxpayer.

new2012

If the money always arrives by the end of the working day, the same. it's calculated daily on the end of day balance.

So if I was to open another Halifax Reward account and transfer £1,000 per month to get £60 per year reward, it would be best to do the transfer during a working day each month?

And I would still have the same interest, less tax, in my savings account as if I never transferred the £1,000?

NFH

new2012 wrote: »

it would be best to do the transfer during a working day each month?

Bank transactions occur only on working days. Even though you may give the instruction on a non-working day, the value date will always be a working day.

Mikeyorks

NFH wrote: »

Bank transactions occur only on working days..

With the fairly major exception - of course - of immediate Faster Payments and internal transfers.

the value date will always be a working day

.......... with the exception of those Banks whose software acknowledges that weekends / Bank holidays do exist.

new2012

with the exception of those Banks whose software acknowledges that weekends / Bank holidays do exist

This will be from a Halifax saving account to a Halifax reward account and straight back into the savings account.

When I get round to actually applying for a Halifax reward account.

Still trying to convince my OH that it is not dodgy to have a joint reward account and one in my name and one in her name as well.

Mikeyorks

new2012 wrote: »

This will be from a Halifax saving account to a Halifax reward account and straight back into the savings account.

Not a problem - as your initial post suggests. My earlier post wasn't aimed at you - I was just correcting the silliness in post #5!

hermante

new2012 wrote: »

So if I was to open another Halifax Reward account and transfer £1,000 per month to get £60 per year reward, it would be best to do the transfer during a working day each month?

And I would still have the same interest, less tax, in my savings account as if I never transferred the £1,000?

You can do it any time on any day, except around 10pm on working days as that's when Halifax days end.

In fact, if you transferred from savings to current at 9.58pm and current to savings at 10.01pm on a Friday, you would lose Friday's, Saturday's and Sunday's interest. (If bank holiday Monday, you would lose 4 days' worth!) If the money was back in the savings account by 9.59pm you would get the normal interest for the whole weekend.

NFH

Mikeyorks wrote: »

With the fairly major exception - of course - of immediate Faster Payments and internal transfers.

.......... with the exception of those Banks whose software acknowledges that weekends / Bank holidays do exist.

No, there are no exceptions. Even FPS transactions always have a value date on working days only, never weekends or bank holidays.

callum9999

NFH wrote: »

No, there are no exceptions. Even FPS transactions always have a value date on working days only, never weekends or bank holidays.

What do you mean by "value date"? The date appearing on the statement is always the date I've sent it and received it on - regardless of whether it's a working day or not.