Monthly or Annual Interest?

beachlou

Hello,

I am planning on opening a mini cash isa in the next couple of weeks. My question is whether to choose one that pays monthly or annually. We will be withdrawing the money to pay for a wedding over the next yr, so was thinking monthly might be best.

If monthly is best, does anyone know which isa pays the best interest at the moment? I know NS&I is best, but it pays annually.

Many thanks

jem16

It won't make any difference if it's paid monthly or annually.

If you are worried about losing interest when you withdraw it then you don't need to. If you withdraw the whole lot interest would be marked up at that point.

KTF

Look at the AER to see if there is any difference.

SeanW

If you're planning to withdraw the money part through a year, in theory it makes more sense to take the annual interest option.

beachlou

Thanks for the advice. I'm planning on withdrawing the money bit by bit when things need to be paid for, so don't think it will stay in there for a full yr.

SeanW

Most accounts pay the interest when you close the account, even part way through the year, as interest is calculated and accrued daily, but does not form part of the cleared balance.

If you don't need access to the interest until you close the account or at the anniversary, annual interest will result in more interest than the monthly option, the monthly option relies on monthly compounding, if you are taking out money, the reduced rate has a negative affect.

Having said that, on £3000 at 6% you're only talking 40p, hence the "In theory" part:p

McSaver

At the moment with ISAs on the best buy tables there doesnt seem to be an ISA thats competitive that pays monthly interest now that the bradford and bingley eISA has been withdrawn.