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Simple interest question

Sorry, its probably obvious but I am struggling this morning.

I have £2500 in my Nationwide flex direct account which I believe is paying 5% interest.

How much should I see added to the account each month? (before tax)
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Comments

  • MoneySaverLog
    MoneySaverLog Posts: 3,232 Forumite
    0.05/12 * £2,500
  • TrickyDicky101
    TrickyDicky101 Posts: 3,534 Forumite
    Part of the Furniture 1,000 Posts
    I guess it depends whether they pay interest monthly - assuming they do then:

    =2500 * 5% /12

    =10.42

    (gross ie before tax)
  • Masomnia
    Masomnia Posts: 19,506 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Somebody will come along to answer you properly in a bit I'm sure, but the answer is 'a bit less than £10.41'.

    You don't get 5%*2500/12 if that's what you're wondering, because the monthly interest is added to the account and you earn interest on that interest so it comes to 5% over the year.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
  • MoneySaverLog
    MoneySaverLog Posts: 3,232 Forumite
    You wont get interest on interest as you'll have to cyphen it off each month as anything over £2,500 does not earn interest.
  • Masomnia
    Masomnia Posts: 19,506 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You wont get interest on interest as you'll have to cyphen it off each month as anything over £2,500 does not earn interest.

    In that case you're probably not getting 5%, OP.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
  • pauljoecoe
    pauljoecoe Posts: 223 Forumite
    edited 15 June 2013 at 10:57AM
    Ah. I was a little confused because I got my first statement and it said £0.33 and then £0.06 taken off (in tax I presume)

    However I have just noticed that the opening credit amount was put in on 31st May and the interest added was 31st May so I guess thats one day interest?

    £0.33 X 31 = £10.23
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    You wont get interest on interest as you'll have to cyphen it off each month as anything over £2,500 does not earn interest.
    Doesn't matter, the monthly rate still accounts for compounding, after all people could have less than £2500 in the account.

    The monthly rate will be 1.05^(1/12) -1 ie 0.4074% ie £10.19 a month if you have £2500+ in the account

    Confirmed on the NW web site:
    5.00% AER (4.89% gross p.a.)
    so 2500*0.0489 annually = £122.25 = £10.19 per month gross, as above, or £8.15 net (after tax).
  • pauljoecoe
    pauljoecoe Posts: 223 Forumite
    Masomnia wrote: »
    In that case you're probably not getting 5%, OP.

    Nationwide say:

    5.00% AER (4.89% gross p.a.) in-credit interest on balances up to £2,500 (fixed for the first 12 months)1
  • ColdIron
    ColdIron Posts: 10,019 Forumite
    Part of the Furniture 1,000 Posts Hung up my suit! Name Dropper
    I got £8.04 in April and £8.31 in May
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    ColdIron wrote: »
    I got £8.04 in April and £8.31 in May
    Makes sense - they'll do it on a daily basis, it'll average £8.15 a month.

    Daily rate 8.15*12/365, times 30 for April and 31 for May gives exactly the figures you quote.
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