Nupty question about interest!!

Greenst

Yesterday we were having a big talk at work about interest!!

We were discussing the Santander 123 account where you can get 3% interest if you have £3k or more in the account, they also do an e saver account which will pay 3% interest if you have 3K or more in the account, a guy at work was saying it's best if you have 6k to split it between the accounts and get 6% interest but another person argued that you'd get the same if you kept the 6K in one account???

I am confused! which is the best way to split the money? Can you get the equivalent of 6% interest or does it not matter as 3K is the lower limit you can get at the higher interest rate?
Does all the above make sense?

Also the discussion went on to pay day loans at 2000% interest and above, I take it the interest is not payable unless you miss a repayment? but we were trying to work out how on earth it's charged if you borrow say £10 do you then have to pay back £20000!!! (obviously not but what would it be?, is it divided over a year as it's APR?) I know it sounds daft but maths has never been my strong point! but how do these pay day loan companies charge?

Just a point of interest (excuse the pun) I don't, thankfully have a pay day loan, but suspect someone at work does as she was looking a bit worried during the conversation!

choccyface2006

If you had 3% interest in one account with £3000 in it for the year you would get £90 interest, if this was an ISA you would keep the full £90.

Same for the other account but the interest would be taxed if it wasn't an ISA.

If you had £6000 in an ISA for 1 year you would have 3% interest on that which would be £180 interest which would not be taxed.

You would never get 6% just by keeping it in two accounts, only ever 3% on £3000 or 3% on £6000.

Hope that makes some sense!

Sarah

opinions4u

Greenst wrote: »

Yesterday we were having a big talk at work about interest!!

We were discussing the Santander 123 account where you can get 3% interest if you have £3k or more in the account, they also do an e saver account which will pay 3% interest if you have 3K or more in the account, a guy at work was saying it's best if you have 6k to split it between the accounts and get 6% interest but another person argued that you'd get the same if you kept the 6K in one account???

I am confused! which is the best way to split the money? Can you get the equivalent of 6% interest or does it not matter as 3K is the lower limit you can get at the higher interest rate?
Does all the above make sense?

The guy at work is a bit silly. You only get half the interest on the eSaver if you half the balance. 3% on £3,000 is £90. 3% on £6,000 is £180.

Also the discussion went on to pay day loans at 2000% interest and above, I take it the interest is not payable unless you miss a repayment? but we were trying to work out how on earth it's charged if you borrow say £10 do you then have to pay back £20000!!! (obviously not but what would it be?, is it divided over a year as it's APR?) I know it sounds daft but maths has never been my strong point! but how do these pay day loan companies charge?

Just a point of interest (excuse the pun) I don't, thankfully have a pay day loan, but suspect someone at work does as she was looking a bit worried during the conversation!

Payday loans don't run for a year but have to quote an APR by law to reflect annual cost.

Typically you borrow a modest amount such as £200 and end up paying £270 (for example) a couple of weeks later. The APR projects these costs out to a full year of borrowing, even if the loan only lasts a week.

anamenottaken

opinions4u wrote: »

The 123 account only pays 3% on the chunk of money above £3k. You are earning less interest in the first £3,000 in the account. Their eSaver6 account pays 3% on the full balance so is the place to stash the cash.

The guy at work is a bit silly. You only get half the interest on the eSaver if you half the balance. 3% on £3,000 is £90. 3% on £6,000 is £180.

Here's what the Santander web site says about 123 interest. My bolding.

1.00% AER/gross (variable) on balances from £1,000
2.00% AER/1.98% gross (variable) on balances from £2,000
3.00% AER/2.96% gross (variable) on balances from £3,000 and up to a maximum of £20,000.

Payday loans don't run for a year but have to quote an APR by law to reflect annual cost.

Typically you borrow a modest amount such as £200 and end up paying £270 (for example) a couple of weeks later. The APR projects these costs out to a full year of borrowing, even if the loan only lasts a week.

I think your interpretation of the Santander wording may not be correct. If it were they should refer, for example, to 2% on balances between £2,000 and £3,000. On the basis of your interpretation, it would be silly to have more than £2,000 because there would be no interest on the first £3,000.

YorkshireBoy

opinions4u wrote: »

Here's what the Santander web site says about 123 interest. My bolding.

Here's what the account's 'interest rates and fees information' section says...

3.00% AER/2.96% gross (variable) on your entire balance once your balance is £3,000 or over (up to a maximum of £20,000)

http://www.santander.co.uk/csgs/StaticBS?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1223424603256&cachecontrol=immediate&ssbinary=true&maxage=3600

My bolding.

opinions4u

anamenottaken wrote: »

I think your interpretation of the Santander wording may not be correct. If it were they should refer, for example, to 2% on balances between £2,000 and £3,000. On the basis of your interpretation, it would be silly to have more than £2,000 because there would be no interest on the first £3,000.

You're right.

If I'd read on I'd have seen "Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account".

Post corrected.

YorkshireBoy wrote: »

Here's what the account's 'interest rates and fees information' section says...My bolding.

Yes, I know, I know!

exel1966

Greenst wrote: »

they also do an e saver account which will pay 3% interest if you have 3K or more in the account, a

Of course the actual rate on the Santander E-Saver 6 is 3.00% AER / 2.96% on the whole balance, not just over £3K, but that includes a 1 year bonus rate of 2.50% AER.