Actual return for your money?

Bishopbasher69

I've been looking at HSBC Advance account... it states ........ if you saved £250 every month for 12 months a total of £3000 will be paid in to your account during the 12 month term. At 5% you would earn approximately £81 interest (gross)

I'm clueless with the whole banking world, 5% of £3000 is £150, so where does £81 come from and how is that worked out?
Thanks in advance for enlightening me. :embarasse

Aidanmc

As you would be paying in £250 monthly you would not be getting 5% on the full £3000 from the beginning.

colsten

This is really a question for the Savings and Investments board, and has indeed been discussed there a few times.

There is also a good explanation on https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

Ballard

As a very very rough guide you can halve the total sum to give something approaching the average balance of the account and work it out on that. £1,500 @ 5% for a year would be £75. There are more accurate ways but I think that for the purposes of this calculation it’s as good as is generally needed.

Neil_Jones

Bishopbasher69 wrote: »

I'm clueless with the whole banking world, 5% of £3000 is £150, so where does £81 come from and how is that worked out?

You only get 5% on what money is in the account. So you would only be earning 5% on £3k for a month or so.

If you can find the holy grail of savings accounts that will pay you interest on money that isn't in the account, please share it with everybody.

soulsaver

If you deposit the maximum £250 pm in a reg saver ac with a 12 month duration, as in this case, you'd get 5% for 12 months on £250 for your first deposit; 5% for only 11 months on £250 2nd deposit; 5% for 10 months on £250 on 3rd; 5% for 9months on £250 on 4th & so on.

Flobberchops

As soulsaver says. The nature of the Regular Saver is such that you have to drip-feed money in, rather than depositing a lump sum. This means your actual interest earned won't be 5% of £3000 as not all of the £3000 will have been in the account from the start. It's an established "trick" in the banking world and allows banks to offer headline savings rates that would be affordable from their perspective if offered on an uncapped or instant access basis.



The way to play the system is to have your money earning interest elsewhere while you're waiting to feed it in - either in a standard savings account or in a series of maturing regular savers or cash bonds, if you have the patience for all that.

PRAISETHESUN

As above, you are only paid interest for money actually in the account so the 5% is only paid on the full amount for the last month. There are plenty of threads on this subject, but I find the following calculator helps to visualise it very well: https://www.thecalculatorsite.com/finance/calculators/savings-calculators.php

Zanderman

Well that's half a dozen excellent explanations for the OP, I hope he's read them and isn't too busy with his hobby.

eskbanker

Flobberchops wrote: »

It's an established "trick" in the banking world and allows banks to offer headline savings rates that would be affordable from their perspective if offered on an uncapped or instant access basis.

Presumably that's meant to be 'unaffordable'?

And I certainly wouldn't agree that there's any form of trickery involved - as pointed out above it's entirely logical only to pay interest on deposited funds, and the fact that some seem to have difficulty with the concept is hardly the banks' fault. In any case, as quoted by OP, the earning potential is typically (maybe even always?) spelled out in the product summary box....

zerog

Neil_Jones wrote: »

If you can find the holy grail of savings accounts that will pay you interest on money that isn't in the account, please share it with everybody.

It has been discussed on this board before, but is rather risky nowadays so I might as well say it openly.

HSBC pays daily interest on the balance at midnight.

Nationwide pays daily interest on the balance at 2030, Saturdays gets 2 days and Sundays none.

Santander pays daily interest on the balance at 2017, same as Nationwide.

Lloyds pays daily interest on the balance at midnight, and for weekends/bank holidays, the balance at midnight Saturdays/Christmas day/Good Friday etc counts for the whole bank holiday.

So by moving your money round every day you can earn interest on it several times. Or just do weekends if you don't want so many transactions.

In recent years Lloyds has closed the accounts of people who continually did this and banned them as customers, and you'd probably trigger some sort of money laundering flag at other banks too now. If you still dare to do this then good luck.