Monthly Or Yearly Interest

rob78

Hi some banks give you the choice of either getting pais intersest annualy or monthly. Which is better and why? Thanks

sloughflint

Whichever has the highest AER. If the AER is the same then it's just your personal preference.

nilrem_2

rob78 wrote: »

Hi some banks give you the choice of either getting pais intersest annualy or monthly. Which is better and why? Thanks

Personally I have my interest paid monthly , I have it paid into my current account to live on and any surplus is reinvested in a instant access higher interest account with the same bank where it earns more interest, it's also quite nice to see the interest appearing in your bank every month, gives one a feel good factor, in most cases though you will get a slightly better return with annual interest, but as I said above if you reinvest some of the monthly interest it does offset some of the effects of the slightly lower rate and you do have the cash in your hand so to speak!

Biggles

rob78 wrote: »

Hi some banks give you the choice of either getting pais intersest annualy or monthly. Which is better and why? Thanks

Normally: there is no difference whatsoever. If in doubt, check the AER %.

The reason there is a monthly option is that some savers, who have a substantial amount tucked away, need an income to live on, thus they can't always wait till the annual interest payment.

Stompa

All other things being equal, then (assuming you pay tax on your interest) you're marginally better off having the interest paid annually. With annual interest you pay the tax once at the end of the year, so will earn a full years interest on that tax. If you pay tax monthly then it won't be in the account for as long so will earn less interest.

The difference is pretty minimal though.