Am I mistaken about Interest Rate %'s on Virgin Money M Plus Account

Molly4

Good Morning

I have to be honest in that I may have misunderstood what I signed up for and this could be down to my naivety at the time. 

I opened a Virgin Money M Plus Current Account and M Plus Saver Account at the end of February 2022 because based on the offer at the time I thought I was getting a good deal on the Interest rates in both Accounts.

The offer at the time was

2.02%

Feast on a 2.02% AER1 (2.00% gross1 per annum variable) interest rate, paid monthly, on your M Plus Account balance up to £1,000.

Linked to the M Plus Saver

2.02%

AER1 (2.00% gross1 per annum variable) on savings balances up to £25,000, and 1.51% AER (1.50% gross1) on any balances above £25,000. Interest paid quarterly.

My understanding of this is I would be paid 2.00% Interest every month on a Balance up to £1000 on the M Plus Current Account and 2.00% Interest every quarter on a Balance up to £25,000 on the M Plus Saver Account. Am I wrong in thinking this?

I have had a "Chat" conversation with Virgin Money who state the 2.00% is the annual amount of Interest. Before I take this further I want to make sure that I am correct and that I should be paid 2.00% Interest monthly/quarterly. 

Interest Rates have been gradually rising and I have been paid the following Interest Rates to date.

Started at 0.35% in February 2022

Rising to 1.00% from 1st March 2022

Rising to 1.56% AER 1.55% Gross from 1st June 2022

Rising to 1.71% AER 1.70% Gross from 27th July 2022

Rising to 2.02% AER 2.00% Gross from 3rd October 2022

This means I have not been getting the the full 2.00% each month or quarter depending on which account I am referring too. I have only started to get 2.00% Interest from 3rd October 2022 because of general Interest Rate rises everywhere.

Also as part of the offer when I signed up for there is an additional 3% Interest payment to be paid on the Current Account which is due to be paid in June 2023 providing the Account is kept open until that time. This I do understand. 

If I have misunderstood then I accept that but thought I would run it past the experts. 

Regards

Molly4

mab3000

So AER stands for Annual Equivalent Rate. 

I’m sure someone on here will offer a better explanation on how this works than I can, but for now here is something I’ve found that might help explain how it works;

https://www.raisin.co.uk/banking/aer/

MorningcoffeeIV

As above, where a rate is 'per annum', that means per year.

Despite the recent rise in rates, you're not going to find a current account with a interest rate of >24%.

However, you can do much better than 2%, so look around at other options.

k_man

Molly4 said:

Good Morning

I have to be honest in that I may have misunderstood what I signed up for and this could be down to my naivety at the time. 

I opened a Virgin Money M Plus Current Account and M Plus Saver Account at the end of February 2022 because based on the offer at the time I thought I was getting a good deal on the Interest rates in both Accounts.

The offer at the time was

2.02%

Feast on a 2.02% AER1 (2.00% gross1 per annum variable) interest rate, paid monthly, on your M Plus Account balance up to £1,000.

Linked to the M Plus Saver

2.02%

AER1 (2.00% gross1 per annum variable) on savings balances up to £25,000, and 1.51% AER (1.50% gross1) on any balances above £25,000. Interest paid quarterly.

My understanding of this is I would be paid 2.00% Interest every month on a Balance up to £1000 on the M Plus Current Account and 2.00% Interest every quarter on a Balance up to £25,000 on the M Plus Saver Account. Am I wrong in thinking this?

I have had a "Chat" conversation with Virgin Money who state the 2.00% is the annual amount of Interest. Before I take this further I want to make sure that I am correct and that I should be paid 2.00% Interest monthly/quarterly. 

Interest Rates have been gradually rising and I have been paid the following Interest Rates to date.

Started at 0.35% in February 2022

Rising to 1.00% from 1st March 2022

Rising to 1.56% AER 1.55% Gross from 1st June 2022

Rising to 1.71% AER 1.70% Gross from 27th July 2022

Rising to 2.02% AER 2.00% Gross from 3rd October 2022

This means I have not been getting the the full 2.00% each month or quarter depending on which account I am referring too. I have only started to get 2.00% Interest from 3rd October 2022 because of general Interest Rate rises everywhere.

Also as part of the offer when I signed up for there is an additional 3% Interest payment to be paid on the Current Account which is due to be paid in June 2023 providing the Account is kept open until that time. This I do understand. 

If I have misunderstood then I accept that but thought I would run it past the experts. 

Regards

Molly4

I don't think the offer in Feb was for 2.02% on the savings.
As such when you opened the account you should have been expecting much less interest.

And as above, 2.0% is the current annual rate, so each month you get 1/12 of that

Molly4

Thank you k_man for explaining it in simple terms.

Ok if I get 1/12 of 2.00% each month then what did I get, for example in March 2022 when the Interest Rate was raised from 0.35% to 1.00%? 

Did I get 1/12 of 1.00%?  

Band7

Interest is calculated daily, not monthly.

Example: if your AER is 1%, in a 28 day February, your interest on £1,000 is £1,000 * 1% / 365 * 28. 

RG2015

Molly4 said:

Thank you k_man for explaining it in simple terms.

Ok if I get 1/12 of 2.00% each month then what did I get, for example in March 2022 when the Interest Rate was raised from 0.35% to 1.00%? 

Did I get 1/12 of 1.00%?  

Yes, this is correct.

If the interest rate in March was 1.00% p.a. then the calculation would be as follows for a balance of £1,000.00

£1,000 x 1.00% X 31 / 365 = £0.85

And looking at it your way, £1,000 x 1.00% / 12 = £0.83 (minor difference due to the the 31/30/28 day months in a year)

Band7

RG2015 said:

Molly4 said:

Thank you k_man for explaining it in simple terms.

Ok if I get 1/12 of 2.00% each month then what did I get, for example in March 2022 when the Interest Rate was raised from 0.35% to 1.00%? 

Did I get 1/12 of 1.00%?  

Yes, this is correct.

 

Not really. As you explain yourself, the annual rate isn’t divided by 12 but by 365 and then multiplied by the number of days of a given month. 

Molly4

Thank you all for your input and explaining this too me.

Ok. Sob story time and before I tell you I believe there are hundreds, probably thousands of people in the same position so perhaps the advice I am given may help them. 

I am a mature person in very poor health. I have a very small income. I am a few years short of State Pension age so I do not qualify for all the Benefits and Discounts Pensioners are able to claim. Because I have Savings I do not qualify for means tested Benefits so lose out that way as well. 

Very soon, like a lot of people I will have to dip into my Savings for everyday living costs. So I am trying to get as much Interest on my Savings as I can so that when I dip into them there is a bit more there for me to utilise. I have to use Easy Access Accounts as I need to be able to access my money for emergencies and essential repairs etc.   

grizzlegrizzle

You'll find more information on the Savings board to help you figure out the best accounts for you but I'd suggest looking at Barclays Rainy Day Saver (which pays 5% interest on up to £5000) and an easy access account like Marcus (paying 2.5%) for the rest. The main MSE site has a good summary of the savings account on offer - with alternatives like Al Rayan paying an expected 2.8% and regular savers (where you can move a little in each month to get 4-5%, for example at Lloyd's).

If you're not already taking advantage of the current account switch offers, then there's lots of advice on this board and people who will be happy to answer questions. It's a good way to boost your income by a few hundred or so, if it's something you feel up to doing.

Best wishes 

RG2015

Band7 said:

RG2015 said:

Molly4 said:

Thank you k_man for explaining it in simple terms.

Ok if I get 1/12 of 2.00% each month then what did I get, for example in March 2022 when the Interest Rate was raised from 0.35% to 1.00%? 

Did I get 1/12 of 1.00%?  

Yes, this is correct.

 

Not really. As you explain yourself, the annual rate isn’t divided by 12 but by 365 and then multiplied by the number of days of a given month. 

Yes indeed you are correct and yes I did qualify it.

However given the context, I believe that I answered the question correctly if not arithmetically accurately.

Personally I am happy use the 1/12 approximation.