Does it matter what time in a month I pay in a lump sum?

rgsoton

Hi.  I’m sure there is an obvious answer to this but can’t find it.  I have a basic savings account and am looking to make regular ish large ish payments on a monthly basis.  The interest is paid monthly (I know it’s ultimately yearly though somehow). My question is if I have £1k in there, opens it up today and am looking to stick an extra £200 in later this month when is the best time to accrue the most interest?  Is the interest paid on the lowest amount that’s in there the longest? Is the best time to put in £200 the day before the interest is paid out?  Thanks for any help.  

Daliah

Interest is calculated daily on the balance in the account at the end of a day. Therefore, the sooner you increase your balance, the more interest you will earn.

masonic

Interest is normally calculated on the closing balance of an account each day, so to maximise interest, pay your money in on the earliest day possible.

rgsoton

Of course.  It would be worked out on a daily basis wouldn’t it and so the earlier the better.  Thanks for that. 

jimjames

You say it's a basic savings account, have you checked it has a decent rate compared to the best buys? Even if it's at the top rate you're probably not going to get much more than 1p a day on £200.

rgsoton

Thanks for your reply.  Yes I have done the research.  Another question…if there is say £1000 in this account and I then temporarily put in another £1k knowing that in a week I am taking it out again should I not even put it in there in the first place as any withdrawal reduces the interest?  Or should I get my calculator out to work it out??!! Thanks. 

Notepad_Phil

rgsoton said:

Thanks for your reply.  Yes I have done the research.  Another question…if there is say £1000 in this account and I then temporarily put in another £1k knowing that in a week I am taking it out again should I not even put it in there in the first place as any withdrawal reduces the interest?  Or should I get my calculator out to work it out??!! Thanks. 

Generally you put the £1000 into which ever account will pay the most interest whilst allowing you to withdraw that £1000 in a week's time. You would then get the interest for those days based on the extra £1000 for the week, and then the daily interest would go back to being based on the lower balance - it isn't subtracted because you withdraw it, the interest for the month is just whatever the totals of each day's interest adds up to.

But without us knowing the account we can't tell you whether that would hold for your account  - e.g. if your account only pays interest on a balance up to a certain amount then putting £1000 in may mean that the added £1000 only gets interest on a certain portion, or indeed on none of it. For instance the virgin current account pays 2% on up to £1000, but no interest on any balance beyond that, so you'd get the same interest at the end of a month if you had £1000 throughout the month or £2000.

rgsoton

Notepad_Phil said:

rgsoton said:

Thanks for your reply.  Yes I have done the research.  Another question…if there is say £1000 in this account and I then temporarily put in another £1k knowing that in a week I am taking it out again should I not even put it in there in the first place as any withdrawal reduces the interest?  Or should I get my calculator out to work it out??!! Thanks. 

Generally you put the £1000 into which ever account will pay the most interest whilst allowing you to withdraw that £1000 in a week's time. You would then get the interest for those days based on the extra £1000 for the week, and then the daily interest would go back to being based on the lower balance - it isn't subtracted because you withdraw it, the interest for the month is just whatever the totals of each day's interest adds up to.

But without us knowing the account we can't tell you whether that would hold for your account  - e.g. if your account only pays interest on a balance up to a certain amount then putting £1000 in may mean that the added £1000 only gets interest on a certain portion, or indeed on none of it. For instance the virgin current account pays 2% on up to £1000, but no interest on any balance beyond that, so you'd get the same interest at the end of a month if you had £1000 throughout the month or £2000.

It’s the HSBC online bonus saver account 1.39% int.  Appreciate this is not top of any list probably in terms of interest.  However there were other criteria for me…convenience of use and easy to open(already with HSBC). Plus my wife wanted me to go with someone “trusted”. 

The account allows withdrawals and pays interest monthly. The bonus element is that if money isn’t withdrawn then you get the 1.39%. This is why I asked the question.  

I see what you are saying now. If there is £1k in there already and I stick another £1k in and then withdraw £1.5k a week later then obviously I will only get the higher rate of interest (1.39%) on £500…I think! As opposed to what I originally thought which was that in withdrawing say £1.5k (having put £2k in) then the remaining £500 is subject to the lower rate because there was a withdrawal. 

thanks again

Notepad_Phil

rgsoton said:

Notepad_Phil said:

rgsoton said:

Thanks for your reply.  Yes I have done the research.  Another question…if there is say £1000 in this account and I then temporarily put in another £1k knowing that in a week I am taking it out again should I not even put it in there in the first place as any withdrawal reduces the interest?  Or should I get my calculator out to work it out??!! Thanks. 

Generally you put the £1000 into which ever account will pay the most interest whilst allowing you to withdraw that £1000 in a week's time. You would then get the interest for those days based on the extra £1000 for the week, and then the daily interest would go back to being based on the lower balance - it isn't subtracted because you withdraw it, the interest for the month is just whatever the totals of each day's interest adds up to.

But without us knowing the account we can't tell you whether that would hold for your account  - e.g. if your account only pays interest on a balance up to a certain amount then putting £1000 in may mean that the added £1000 only gets interest on a certain portion, or indeed on none of it. For instance the virgin current account pays 2% on up to £1000, but no interest on any balance beyond that, so you'd get the same interest at the end of a month if you had £1000 throughout the month or £2000.

It’s the HSBC online bonus saver account 1.39% int.  Appreciate this is not top of any list probably in terms of interest.  However there were other criteria for me…convenience of use and easy to open(already with HSBC). Plus my wife wanted me to go with someone “trusted”. 

The account allows withdrawals and pays interest monthly. The bonus element is that if money isn’t withdrawn then you get the 1.39%. This is why I asked the question.  

I see what you are saying now. If there is £1k in there already and I stick another £1k in and then withdraw £1.5k a week later then obviously I will only get the higher rate of interest (1.39%) on £500…I think! As opposed to what I originally thought which was that in withdrawing say £1.5k (having put £2k in) then the remaining £500 is subject to the lower rate because there was a withdrawal. 

thanks again

No, for that account, if you withdraw any money during the month (even 1 pence) then the interest rate goes to 0.4% for all the daily balances in your account in that month, even for those days before the withdrawal.. So you'd get 0.4% on £1000 at first, then 0.4% on £2000, and finally 0.4% on £500.

If you're likely to need regular withdrawals then you would probably do better to have a secondary account that you can add to and withdraw as needed, and only put spare money into the bonus saver account that you know you're unlikely to need to withdraw.

rgsoton

Thanks for your help. Glad I asked the question. 

smithers1981

If you want to maximise interest then look for the best rate. 1.39% is poor and you have strings attached.