interest paid monthly or yearly?

randm

if i have a choice of having interest paid monthly or yearly on a savings account is it better to go for the monthly and have it paid back into the savings account, will i then get interest on the interest made?

Gollygumdrops

If available, I always go for the monthly option, mainly so that I can see it on the account without having to wait a year. (picture Scrooge counting his money daily;))

As you say, the interest is compounded with the monthly option, but in reality the organisations usually offer a slightly lower monthly interest rate, so in the end I'm not sure there is really any difference with the amount you receive monthly or yearly!

But as I am not a money expert I'm sure that those who know more will advise you, if there is any advantage to one or the other!

PeacefulWaters

Compare the AER.

I'd rather gave 1.1% AER paid annually than 1.0% AER paid monthly.

ColdIron

Some fixed term deals pay the interest into a nominated account so won't be compounded and you could earn less. You might also consider your tax situation, you might benefit from choosing which tax year the interest is paid

surreysaver

PeacefulWaters wrote: »

Compare the AER.

I'd rather gave 1.1% AER paid annually than 1.0% AER paid monthly.

If you're leaving it in the account to compound, it shouldn't make a difference.

And accounts which give the option of monthly interest allow me to reduce next year's taxable limit on interest (I won't reach it this year)

polymaff

As ColdIron says, it can be tax-beneficial to receive the income regularly rather than in annual lumps. No nasty coincidences of annual payments pushing beyond your PSA or into higher-rate taxation for that tax year.

In terms of the actual income, we are well past those simpler times when Banks and BSs offered the same rate whatever the interest period and canny savers made a few extra bob as a result

Xenon

I always go for the monthly option - just like to see the extra money in the account every month.

PeacefulWaters

surreysaver wrote: »

If you're leaving it in the account to compound, it shouldn't make a difference.

Even with a different AER?

Kim_13

Account I intend to build a significant sum in - Monthly

Account I don't envisage keeping much in - Annual, as otherwise you're watching 1p a month or something be credited in interest.

polymaff

PeacefulWaters wrote: »

Even with a different AER?

How often do you see an account which advertises different AERs for monthly versus annual interest nowadays?

PeacefulWaters

polymaff wrote: »

How often do you see an account which advertises different AERs for monthly versus annual interest nowadays?

It's rare.

But that doesn't change the point made.