Regular Savers - the real interest earned

neetugopal

I have a regular saver account with Halifax paying 7% interest rate. Standing order is set up from another bank and it takes around 4 days to reach my Halifax account. I was wondering how much interest I lose in a year. My calculation is as below

4 days to reach regular saver account*12 monthly payments = 48 days in a year

If I had kept my money in my originator bank then I would have received 365 days interest but I lose 48 days interest a year in transift.

365-48=317 days

Actual interest % = 317/365*7 = 6.07%

So in real terms the actual interest earned is 6.07% not 7%.

I am no expert in doing maths and may be completely wrong. Could someone please confirm if my theory is correct?

CLAPTON

the idea is correct but the maths is incorrect.

each 250 you pay suffers your 4 days lost but your calculation assumes all the money suffers 48 days loss which is not correct

so each payment of 250 loses 4 days which is 250*4*7%/365 or about 19 pence hence losing over the 12 payments of 250 about £2.31

working it out correctly, the equivalent increase rate is reduced for 7% to 6.86% a much better result.

oldfella

over a year you make about £16 better than a standard savings account at 5.7%. This advantage will reduce further as BOE rate goes up next month. These one year RS are not worth the trouble IMHO.

Mike

neetugopal

Thanks Clapton for correction. I was sure of making mistake somewhere. 6.86% seems a better rate than 6.07% :-)

RocketMan

CLAPTON is bang on the money, my calcs get the similar results.
As to one year savers being a waster of time if you cant afford to invest a large sum then they are of great advantage. If you were to invest £2000 at 5.7% for a year you will earn about the same interest as £250 a month into a reg saver at 7%.

Paul_Herring

If you can afford to, you could just put the year's contributions (or what's left of it) into the Halifax Websaver (the usual account the RS gets swept into if you don't have another account with them) and transfer the money from there - it happens same day, no interest lost. (That said, if the websaver's interest rate is less than where the money comes from at the moment, or you cannot afford to do this, this may not be the best thing to do.)

steady__eddie

I suppose that it's a pity that payments can't be made by Direct Debit, then there wouldn't be any lost interest. The only regsave that I'm aware of that uses D.D.s is Hanley but at 5.85%, is it worth it ?

LittleVoice

steady__eddie wrote: »

I suppose that it's a pity that payments can't be made by Direct Debit, then there wouldn't be any lost interest. The only regsave that I'm aware of that uses D.D.s is Hanley but at 5.85%, is it worth it ?

I believe Britannia 7.5% one-year regular saver (maximum £250/month) collects by DD.

Kazza242

steady__eddie wrote: »

I suppose that it's a pity that payments can't be made by Direct Debit, then there wouldn't be any lost interest. The only regsave that I'm aware of that uses D.D.s is Hanley but at 5.85%, is it worth it ?

Monmouthshire BS' Saver Plus regular savings account uses D.D. too and pays 6.25%.

steady__eddie

I've got that one and had forgotten all about it. Strangely enough, it always leaves my drip feeder a couple of days after the date that I had set it up for ?
Britannia use D.D. for their super duper monthly saver but that alas has long since closed.

McSaver

HSBC regular saver pays 8%

Barclays 12.5% and Alliance and Leicester 12% if you have a current account that pays in £1,000 a month.