Can anyone help me work out if my TSB Classic Plus interest is right?

purplestar133

I have asked this before and have saved the calculation Yorkshire Boy kindly gave me to work out the interest, but I still can't seem to get the figures right. Sorry for asking again!

I have 2 TSB Classic Plus accounts opened when they first came out. Since then I've had letters asking me to do stuff to keep the 5% interest rate, so just want to make sure everything has gone according to plan.

They each have £2000 in and each month, in the first couple of days of the month, I transfer in £500, then out again this time with the interest payment on top. Then I leave £2000 in for the rest of the month until early the next month. I have been getting £6-7 in interest each month. The most I've ever got was £7.08.

For example:

2nd Feb in: 6.65 (interest) balance: 2006.65
9 Feb in: 500 balance: 2506.65
9 Feb out: 506.65 balance: 2000

2 Mar in: 6 (interest)

Does this sound about right for 4.89% after tax? I've tried to calculate it but I think I am struggling because each month is different. I don't always transfer in and out on the same day each month, though I try to do it in the first few days. I left it a bit later than usual in the example I have given. I just can't get the figures to match and my grasp of maths isn't great anyway.

I'd be grateful for any help!

jimjames

Yes that's about the right amount, same as I get.

purplestar133

jimjames wrote: »

Yes that's about the right amount, same as I get.

Phew, thanks!

YorkshireBoy

You can ignore the higher balance, because you won't earn interest on it.

So you had £2,000 in there for 28 days (3rd Feb to 2nd March inclusive, which is 2nd working day of Feb to 1st working day of March, as per the T&Cs)...

£2,000 x 4.89% / 365 x 28 x 0.8 = £6.00

mgdavid

purplestar133 wrote: »

..... I am struggling because each month is different. .........

that's because some months have different numbers of days in them and the weekends fall on different dates. Interest is calculated daily. Have you read and understood the Ts & Cs you signed up to when you opened the account?

purplestar133 wrote: »

my grasp of maths isn't great anyway..........

thant's not going to help

Trentenders

mgdavid wrote: »

that's because some months have different numbers of days in them and the weekends fall on different dates. Interest is calculated daily. Have you read and understood the Ts & Cs you signed up to when you opened the account?



thant's not going to help

1. There's no point reading T's & C's for the sake of a couple of quid a month - especially when you can ask someone on here, who will likely know the answer. I must confess to not having read the T's & C's for any bank account that I've ever opened.

2) If someone isn't good with maths and asks a question, try to not to be a knob about it.

colsten

Trentenders wrote: »

1. There's no point reading T's & C's for the sake of a couple of quid a month - especially when you can ask someone on here, who will likely know the answer. I must confess to not having read the T's & C's for any bank account that I've ever opened.

that is amongst the worst pieces of advice I have ever read on this board. T&Cs are quite simple to understand these days, and everybody should make an effort to know what they are signing for instead of just walking in with a blindfold. Nobody on this forum or this website is governing the relationship between an account holder and the bank. T&Cs do.

Trentenders wrote: »

2) If someone isn't good with maths and asks a question, try to not to be a knob about it.

and this comment helps the OP? In what way?

OP, may be you find it easier to work with the daily interest rate for your TSB Plus, which you calculate as follows. The calculation assumes you have £2,000 in the account at the end of each day, every day of the month.

£2,000 x 4.89% / 365 x 0.8 = 21p (27p before tax)

Then simply multiply the daily amount with the number of days since your last interest payment. It is usually just the number of days in the month prior to the date you get the interest paid. It's as simple as that. You might get a penny's difference here and there due to rounding errors but that doesn't really matter.

If your balance varies below £2,000, the calculation gets more extensive but I don't think you do so I'll not confuse matters by going into detail.

redux

The maths doesn't need to be made complicated.

If it's £2000 balance most of the time, and 5% interest gross, that would be £100 a year gross or £80 net, and a 12th of those amounts per month, £8.33 or £6.66.

colsten

redux wrote: »

The maths doesn't need to be made complicated.

If it's £2000 balance most of the time, and 5% interest gross, that would be £100 a year gross or £80 net, and a 12th of those amounts per month, £8.33 or £6.66.

Except the banks don't calculate interest like that, and you need to use the gross interest rate, not the AER, as interest is paid monthly.

mgdavid

redux wrote: »

The maths doesn't need to be made complicated.

If it's £2000 balance most of the time, and 5% interest gross, that would be £100 a year gross or £80 net, and a 12th of those amounts per month, £8.33 or £6.66.

er, the point is that interest is calculated daily so it isn't a 12th of the annual amount, that is what the OP is querying. If you read the OP, he says ' I have been getting £6-7 in interest each month. The most I've ever got was £7.08.'

redux

mgdavid wrote: »

er, the point is that interest is calculated daily so it isn't a 12th of the annual amount, that is what the OP is querying. If you read the OP, he says ' I have been getting £6-7 in interest each month. The most I've ever got was £7.08.'

All interest is calculated proportional to balance and the time it's there.

I see now that this account has interest paid monthly, so my post would have been slightly simplifying that, but if the interest is over £7 net for one period it looks like they are sometimes counting slightly over a month.