Are my calculations correct? Interest earned??

stylus360

Hi all

Been going through savings guide an noticed Nationwide flex direct offers 5%aer, 4.89 gross. Upto 2.5k for one year.

So i would earn £97 for the year as a lower income tax payer
?

Is this correct?

Thanks

YorkshireBoy

£97.80

£2,500 x 0.0489 x 0.8

CLAPTON

of course, if you saved the monthly interest in an account earning 5% AER then you would in total earn £100 (2500 x 5% x .8)

bowlhead99

CLAPTON wrote: »

of course, if you saved the monthly interest in an account earning 5% AER then you would in total earn £100 (2500 x 5% x .8)

Precisely, that's the whole point of giving the AER figure on a monthly paying account.

The problem with a capped account like this one is that you can't actually earn the "interest on interest" implied by the AER on the full 2500, because any interest received puts your balance above the cap for paying any more interest. So to get that last couple of quid you would need to put the interest earned to work, elsewhere. If you were only trying to save 1000 or even 2400 you would be fine to leave the interest where it is and achieve the full AER.

CLAPTON

bowlhead99 wrote: »

Precisely, that's the whole point of giving the AER figure on a monthly paying account.

The problem with a capped account like this one is that you can't actually earn the "interest on interest" implied by the AER on the full 2500, because any interest received puts your balance above the cap for paying any more interest. So to get that last couple of quid you would need to put the interest earned to work, elsewhere. If you were only trying to save 1000 or even 2400 you would be fine to leave the interest where it is and achieve the full AER.

yes indeed

in practice most people won't actually gain much from the account, what with the feeding requirement etc which is why they can afford to over the deal

badger09

CLAPTON wrote: »

yes indeed

in practice most people won't actually gain much from the account, what with the feeding requirement etc which is why they can afford to over the deal

However, some of us are getting that 5% gross on £10k for a year, which is better than my 'next best similar alternative' @ 4% gross on £18k - worth spending a couple of minutes a month on the £1k shuffle

stylus360

badger09 wrote: »

However, some of us are getting that 5% gross on £10k for a year, which is better than my 'next best similar alternative' @ 4% gross on £18k - worth spending a couple of minutes a month on the £1k shuffle

How is that done ?

I only opened the flex direct as I have a standard flex account earning zero.

I pay in around £3.5k month but use anything above £2.5k left in my account to pay off my mortgage of around £8k at 3.99%.

badger09

stylus360 wrote: »

How is that done ?

I only opened the flex direct as I have a standard flex account earning zero.

I pay in around £3.5k month but use anything above £2.5k left in my account to pay off my mortgage of around £8k at 3.99%.

Simples:) As I posted on another thread - have a look at Nationwide's FlexDirect FAQs:

http://www.nationwide.co.uk/current_account/flexdirect/FAQs.htm

You can apply for up to 4 FlexDirect accounts but are only guaranteed 5% on the first.


Have a read through the last 3 or 4 pages of this thread, where there has been speculation (but IIRC no confirmation) of a 'rule change'.

https://forums.moneysavingexpert.com/discussion/4472901

NB though, as I also posted on another thread - beware of applying for too many new current accounts - especially those with overdraft facility, if you might need a mortgage or other credit in the near future.