B&b Annual Or Monthly Interest

brookerbabycute

Hello

I have quick question. I am about to join Bradford and Bingley. I wanted to know whether I should select Monthly or Annual Interest. The reason I ask is because I was thinking that if I get interest monthly rather than annually then won't I earn more interest because I will earn interest on the interest just added to my account. Any thoughts would be appreciated. Thank you.

Geoffo_M

There are two different interest rates say 6.4% for the annual interest and 6.22% for the monthly interest. As you say, because monthly interest becomes compounded, over the year total monthly interest added up will equal the annual interest. Hope that makes sense

LittleVoice

That works when the interest is added gross rather than after deduction of tax.

I suggest you do the sums to see whether it would really work for you if tax will be deducted from your interest. If it is, then you have interest compounding only on the nett monthly amount of interest - so it may well be better to take your interest annually.

Darth_Calculus

By my calculations, if you invested £10,000 in this account, and were a basic tax payer, you would receive an extra £2.93 by having interest paid annually.

I quite like seeing my savings grow, and opt for monthly interest, as (from above) the difference is minimal.

Each to their own.