Monthly or Yearly Interest?

whippet

Hello, could anybody tell me: is it better to get interest paid monthly or yearly on savings account? I was under the impression you got a higher rate if you got it paid yearly but some accounts give the same AER for monthly and yearly. Cheers!!!!

Stompa

You get a tiny bit more by opting to have it paid yearly. This is due to the fact that you're also paying tax either monthly or yearly. So, if you choose yearly, the tax that you would have paid monthly remains earning interest in the account until the end of the year.

whippet

thanks stompa thats good news as Ive opted for yearly interest:j

Darth_Calculus

Yeah, I have done a quick calculuation and if you put in £1000 into an account paying 5.00% gross (4.00% net), you would get £40.00 if you opted for yearly interest, or £39.82 if you opted for monthly interest.

I actually prefer monthly interest, as I like to see the interest received closer to the period to which it relates to (i.e. interest for the month of January paid on 1st Feb, not 1st Jan the following year).

For the sake of 18p per £1000 per year, I dont think it is really a factor in my decisions.

nilrem_2

Darth_Calculus wrote: »

Yeah, I have done a quick calculuation and if you put in £1000 into an account paying 5.00% gross (4.00% net), you would get £40.00 if you opted for yearly interest, or £39.82 if you opted for monthly interest.

I actually prefer monthly interest, as I like to see the interest received closer to the period to which it relates to (i.e. interest for the month of January paid on 1st Feb, not 1st Jan the following year).

For the sake of 18p per £1000 per year, I dont think it is really a factor in my decisions.

That loss of 18 pence may well be made up anyway if you opt for monthly interest at a time when rates are rising, for example you invest in a one year fixed rate bond with monthly interest early in the period at say 4% net that return is fixed, however the interest you are paid monthly can be reinvested at a higher rate if the BOE rate rises therefore in some cases monthly can give a better return!

FWIW I much prefer monthly rates, it gives me cash to live on and the surpluses can be reinvested anyway, it's also nice to see the interest arriving in my bank account every month, gives one a feel good factor!

free4440273

same here, i find the monthly option quite reassuring