Trying to understand AER

splo

Hi there.
I'm a bit confused over something and just wondered if anyone could help.

I have two savings accounts. One with interest paid monthly, one yearly, with AER calculated on the 31st Dec. Currently my savings are in the monthly account.

If I was to move my savings from my monthly account into my yearly account sometime in December before the 31st, would I recive the maximum amount of AER on that account, even though it may have been empty for the previous 11 months of the year?

Thanks

innovate

You will only ever get interest for the number of days you had money in your accounts. Whether the interest gets paid monthly or annually makes no difference. Interest gets generally calculated on a daily basis, for the balance you had in the account at the end of the day, using 1/365th of the AER.

AER stands for Annual Equivalent Rate and lets you compare accounts on a like-for-like basis.

YorkshireBoy

innovate wrote: »

Whether the interest gets paid monthly or annually makes no difference. Interest gets generally calculated on a daily basis, for the balance you had in the account at the end of the day, using 1/365th of the AER.

That's only true for annual interest paying accounts (where the gross p.a. rate = the AER).

Better to say 1/365th of the gross p.a. rate, which will then encompass monthly paying interest accounts too.