The Top Easy Access Savings Discussion Area

fotow

And Atom still paying 3.15 and getting away with it.

Bigwheels1111

fotow said:

And Atom still paying 3.15 and getting away with it.

Thats a good rate as some banks still pay 1%.

Vote with your feet and move your money to a higher paying account.

In the last month, Coventry to Chip, Chip to coventry, Coventry to Tandem today.

Round and round it goes.

cwep2

jaceyboy said:

VNX said:

jaceyboy said:

Can someone tell me the why you get less interest for monthly interest please?

It’s because the interest compounds. 

Can you explain please?

The difference between monthly interest rate compounding to AER (Annual Equivalent Rate) is about 0.07% for the top savings accounts. Here's an example of how £1000 invested at 3.93% monthly is equivalent to 4% interest after compounding:

Date	Account Balance	Interest	Gross rate
01-Jan	£1,000.00		3.93%
01-Feb	£1,003.34	£3.34	3.93%
01-Mar	£1,006.36	£3.02	3.93%
01-Apr	£1,009.72	£3.36	3.93%
01-May	£1,012.98	£3.26	3.93%
01-Jun	£1,016.36	£3.38	3.93%
01-Jul	£1,019.65	£3.28	3.93%
01-Aug	£1,023.05	£3.40	3.93%
01-Sep	£1,026.47	£3.41	3.93%
01-Oct	£1,029.78	£3.32	3.93%
01-Nov	£1,033.22	£3.44	3.93%
01-Dec	£1,036.56	£3.34	3.93%
01-Jan	£1,040.02	£3.46	3.93%
		£40.02	4.00%

You can see that in a year you've earned (just over) £40 on £1000 which is 4% of the amount you've deposited with a rate of 3.93%. Simply put, the interest paid in the earlier months means that by the end you are earning 3.93% on a larger amount than £1000. Compounding is the term we use to describe the 'interest on the interest'.

All UK bank accounts have to quote the AER (to two decimal places) which stands for the Annual Equivalent Rate, so an account with the monthly interest rate of 3.93% will say the AER is 4.00%. This AER means you can compare savings accounts fairly and equally. If accounts pay interest annually you would just get 4% of the £1000 on the payment date.

In the UK interest is paid on what we call Actual/365 days basis, which means in most cases the interest you earn can be calculated by the balance at the start of the interest period x number of days in interest period x gross rate / 365. So if interest is paid on the 5th of the month, you will earn more for a 31 day month than a 30 day month, it also depends on weekends etc as well as any deposits and withdrawals that are made. Usually interest is calculated "daily" so if you deposit something in the middle of the month you still earn interest for the days it was in the account, but not the whole month/year. Note that the rate you need to use in the above calculation would be different to the AER if monthly interest is paid, some accounts will only quote the AER (eg Chip) but pay interest monthly, but in these cases they will be using the monthly rate that is equivalent.

flobbalobbalob

The difference between monthly interest rate compounding to AER (Annual Equivalent Rate)

An excellent illustration. It should be sticky somewhere. Well done.

jaypers

fotow said:

And Atom still paying 3.15 and getting away with it.

My impression of Atom has gone way down because of this. Really poor. Moved my money out a while ago, bar a fixed that matures in August. Unless they get something really market leading/impressive, they are bottom of my list now. 

RG2015

jaypers said:

fotow said:

And Atom still paying 3.15 and getting away with it.

My impression of Atom has gone way down because of this. Really poor. Moved my money out a while ago, bar a fixed that matures in August. Unless they get something really market leading/impressive, they are bottom of my list now. 

I don’t have any feelings about banks. In the last few years I have moved my easy access money around 8 or 9 accounts, to the one with the best rate.

I personally find it strange when a bank is criticised for not offering a high rate. It is dead easy to move money out.

As it happens, Atom have some decent fixed rates. Would anyone avoid these just because Atom had fallen behind on the easy access top rates table.

grumbler

flobbalobbalob said:

The difference between monthly interest rate compounding to AER (Annual Equivalent Rate)

An excellent illustration. It should be sticky somewhere. Well done.

3.93%/12=0.003275
Every (average) month the balance is multiplied by 1.003275
If the interest remains in the account, after 12 months the original balance is multiplied by 1.003275^12=1.00400.
The AER is 4%

searching4bestrates

Forgive me as I'm sure this has been previously covered some time ago. Of the current top of the list easy access savings accounts, both Tandem and CHIP require Open Banking in order to operate the account, right?

I know it is perhaps an unwarranted concern, but I avoid providers that insist on Open Banking to operate. Whilst I did open a separate current account with Chase to mitigate the risk/concerns I have since CHIP's rate has been attractive over the last couple of months, I then found that this didn't work with CHIP. It is frustrating.

PloughmansLunch

searching4bestrates said:

Forgive me as I'm sure this has been previously covered some time ago. Of the current top of the list easy access savings accounts, both Tandem and CHIP require Open Banking in order to operate the account, right?

I know it is perhaps an unwarranted concern, but I avoid providers that insist on Open Banking to operate. Whilst I did open a separate current account with Chase to mitigate the risk/concerns I have since CHIP's rate has been attractive over the last couple of months, I then found that this didn't work with CHIP. It is frustrating.

Tandem can be funded with Faster Payments (from a verified, linked account)

janusd

searching4bestrates said:

Forgive me as I'm sure this has been previously covered some time ago. Of the current top of the list easy access savings accounts, both Tandem and CHIP require Open Banking in order to operate the account, right?

I can only speak of Tandem on this (as Chip is a major hassle for me to use, opened twice, finally gave up) - but I think you only need to use Open Banking with Tandem initially to identify yourself... my OB connection expired 2 years ago with them, but I can still deposit via FP and withdraw via the app without having the OB connection active.