Tesco bank interest

zak2012

Tesco paid me £5 after tax which was £6.25 before tax.i thought i get £6 after tax if you have £3000 if its 3% rate . am i wrong?

LXdaddy

The general information on the Tesco Current account includes

v3.00% AER/2.96% Gross variable credit interest on balances up to £3000. Interest paid monthly.

So firstly the 3% headline figure is the GROSS (ie before deduction of tax) amount.
Secondly its 3% AER paid monthly so if you had £2000 in the account and they added the interest each month that would compound and over the year you would have had a total of 3% gross.


If you have £3000 or more in the account throughout the year then the added interest would not itself be subject to interest so the compounding would not work.


What actually gets paid is 2.96% worked out on the daily balance and added once per month.


If your daily balance is £3000 or more and if we assume each month is the same length then £3000 * 2.96% / 12 = £7.40 gross. Subtract the 20% basic rate that is currently deducted = £6.16. In a 31day month you would get slightly more if you kept the full £3000 balance. If the most recent month was less than 1/12th of a year (like February for example) or you didn't have £3,000 as your daily balance every day in the month then you would get less than £6.16.

PeacefulWaters

How long was your money in for?

pafpcg

For my partner's Tesco account with a £3,000 balance since the last interest payment, gross interest of £7.05 was credited on 26th March (which appears on the account statement the following day). The net payment would be £5.64.

Assuming you have had the full £3,000 balance continuously, the gross interest credited varies only with the number of days since the last interest payment. The maximum has been £7.64 (31 days) with £7.29 for 30-day months. The March payment is low because February was only 29 days.