The Top Easy Access Savings Discussion Area

grumbler

uptdale said:

grumbler said:

uptdale said:

grumbler said:

loko2468 said:

spider42 said:You can choose whether you want monthly or annual when you open the account.

Thanks - in that case why would anyone chose annual over monthly? Doesn't seem there are any benefits?

If it's monthly and you don't withdraw interest the annual result is the same as if it's annual interest.

Some people prefer to see or withdraw interest monthly.

The result is the same if you keep the account open for 12 months and the annual interest is paid in 12 months time.  If you close earlier, you'd get a bit more interest opting for annual interest because you'd get the annual interest rate on closure. 

I think you are mistaken. Both monthly and yearly interests are calculated daily.

Yes, monthly interest is calculated daily at 4.22%, and annual interest is calculated daily at 4.30%.  But monthly interest is compounded monthly, annual interest is compounded annually.  That's the difference.  It takes 12 months for the interest on monthly interest to catch up with the annual interest rate.

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

cwep2

grumbler said:

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

You don't earn interest on the interest until it's paid (monthly). So if you deposit £1000, you are earning the 4.22% / 365 daily on £1000 for about a month, and after the 1st month's interest payment (approx £3.50) you will be earning 4.22% / 365 daily on approx £1003.50, then after next interest payment earning interest on approx £1007.00 etc.

Calculated daily means that if you deposit an extra £1000 just one day before next interest payment, then (assuming 31 day month) your interest will be 30days x £1000 + 1day x £2000. Basically the interest paid is the rate/365 x balance at end of day, and balance will only increase when interest is paid, it doesn't accumulate and compound until payment.

The calculation is (1+0.0422/12)^12-1 = 0.0430, you will find if interest is paid daily (as per above calculation) it's 4.31% to 2 decimal places. Note that some places do pay interest daily, and you can see the difference in the gross/AER rates. Similarly VM pay interest quarterly which works out slightly worse again.

grumbler

cwep2 said:

grumbler said:

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

You don't earn interest on the interest until it's paid (monthly). 

Again, I think you are mistaken. It's always calculated daily, but credited either monthly or annually.
That said, daily compounding within one month is negligible:
(1+0.0422/12)^12-1 = 0.043026
(1+0.0422/365)^365-1 = 0.043101

0.0422/12=0.00351667
0.0422/365*30 = 0.003468
(1+0.0422/365)^30-1 = 0.003474

The same for all credit products (CCs, overdrafts, loans) - calculated daily, added monthly or annually (or on closure).

jak22

Interest of 1/365 of the rate is calculated on the daily balance (that changes only when funds are paid in or withdrawn) and accumulated into a separate (hidden) balance. That rate will either be the annual rate or the monthly rate according to the account option chosen. At the end of the month (for monthly interest) that interest balance is added to the main balance or paid away. 

fonesaver

mebu60 said:

Received an SMS from Newcastle BS this morning to rate my recent experience. Gave lowest ratings of not at all likely for would I recommend and very dissatisfied for rating my recent experience. 
There was then a text field to explain why. Like at least one other on here I was a recent Cash ISA customer which makes it all the more ridiculous being subject to id and residency checks when I am eminently identifiable electronically. The use of snail mail is ridiculous too adding time and even the risk of identity theft.
I only persevered because unless Skipton do something proactive the Newcastle BR tracker at -0.7% will always beat their -0.9% account. 

Gave them all 1 out of 5. Applied AGAIN today and was successful with no id checks!!
My text reply:
Why no online id verification. No reply to contact request, phone not answering after 20 mins on hold

cwep2

grumbler said:

cwep2 said:

grumbler said:

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

You don't earn interest on the interest until it's paid (monthly). 

Again, I think you are mistaken. It's always calculated daily, but credited either monthly or annually.
That said, daily compounding within one month is negligible:
(1+0.0422/12)^12-1 = 0.043026
(1+0.0422/365)^365-1 = 0.043101

The same for all credit products (CCs, overdrafts, loans) - calculated daily, added monthly or annually (or on closure).

AER has to be quoted to 2 decimal places (by law).
If they paid interest at 4.22% gross and it was compounding daily, then as per your own calculation the AER on the account would be 4.31% not 4.30%.

Anyway in real world terms it makes almost no difference, but you can see for example the Virgin account which pays quarterly interest converting the gross rate r% to the AER quoted works out as (1+r%/4)^4 (rounding to 2 decimal places) which is different to both the equivalent calculation compounding in 12 or 365 periods. 

cwep2

cwep2 said:

grumbler said:

cwep2 said:

grumbler said:

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

You don't earn interest on the interest until it's paid (monthly). 

Again, I think you are mistaken. It's always calculated daily, but credited either monthly or annually.
That said, daily compounding within one month is negligible:
(1+0.0422/12)^12-1 = 0.043026
(1+0.0422/365)^365-1 = 0.043101

The same for all credit products (CCs, overdrafts, loans) - calculated daily, added monthly or annually (or on closure).

AER has to be quoted to 2 decimal places (by law).
If they paid interest at 4.22% gross and it was compounding daily, then as per your own calculation the AER on the account would be 4.31% not 4.30%.

Anyway in real world terms it makes almost no difference, but you can see for example the Virgin account which pays quarterly interest converting the gross rate r% to the AER quoted works out as (1+r%/4)^4 (rounding to 2 decimal places) which is different to both the equivalent calculation compounding in 12 or 365 periods. 

The account I am quoting is here, 3 different gross rates, 3 different AERs.
 https://uk.virginmoney.com/private/savings/private-savings-account/#what-is-the-interest-rate
You'll note interest here is quarterly, and eg for the 4.75% gross rate, using 4 period compounding = 4.8353%, 12 period 4.8548% and 365 period 4.8643% so AER would be 4.84%, 4.85% or 4.86% respectively.

Same for any other gross/monthly > AER conversion, the 12 period compounding will always work, the 365day won't.

Freedommm

Applied for Newcastle BS Tracker online. Very quick and easy opened account, no issues! 
Nothing says anything about an "authentication letter" in the post. Do they send such letters? 

fabsaver

fabsaver said:

Mr._H_2 said:

jaceyboy said:

Just applied but they are asking for additional proof of identity, has anyone managed to do this electronically rather than postal?

Me too, which is odd because I'm usually easily verified electronically. One would imagine that if there were a means to provide the documentation electronically, they would provide those details in the application confirmation email. However, the only method provided is to post physical copies to them (how quaint!)

Same here. Very odd as I open lots of accounts and always get verified electronically.

I can only think of one occasion in the last few years where the electronic checks failed and I was asked to provide id. However it was just a temporary blip because I'd applied in the early hours. On that occasion I reapplied during working hours and the account was opened instantly.

Unless they allow documents by email it's really not worth the effort. It's very likely the rate will be beaten soon anyway. Their loss.

Just applied again online for the Newcastle base rate tracker, as I've noticed a few comments saying accounts successfully opened today.

It worked! All the same details as yesterday but this time account opened straight away with no id documents needed.

It seems there may have been some sort of glitch with the electronic verification yesterday. Perhaps due to the volume of account applications. For anyone else who was asked to post proof of id it's worth trying another online application.

grumbler

cwep2 said:

grumbler said:

cwep2 said:

grumbler said:

No, I don't think so. Annual interest is calculated daily at 4.22%. After compounding it makes 4.3%:

(1+0.0422/365)^365-1 = 0.043

As simple as that.

You don't earn interest on the interest until it's paid (monthly). 

Again, I think you are mistaken. It's always calculated daily, but credited either monthly or annually.
That said, daily compounding within one month is negligible:
(1+0.0422/12)^12-1 = 0.043026
(1+0.0422/365)^365-1 = 0.043101

The same for all credit products (CCs, overdrafts, loans) - calculated daily, added monthly or annually (or on closure).

AER has to be quoted to 2 decimal places (by law).
If they paid interest at 4.22% gross and it was compounding daily, then as per your own calculation the AER on the account would be 4.31% not 4.30%.

Possibly, you are right.
4.22% seems to be the gross 'monthly' rate calculated from the base 4.30% figure:
(1.043^(1/12)-1)*12 = 4.2175%
I still see no grounds for claiming that 

"The result is the same if you keep the account open for 12 months and the annual interest is paid in 12 months time.  If you close earlier, you'd get a bit more interest opting for annual interest because you'd get the annual interest rate on closure. "

Maybe because 4.22 > 4.2175 if they really use the former for calculations.