7.0% actually 3.69%?

t1redmonkey

I think it's quite transparent what you get back from Regular Savers, as I believe all banks/BS's always have a section quite prominently displayed on the product page saying something along the lines of 'What would the balance be after 12 months of investing £x per month?' and it gives the figures there.

jimexbox

Beddie said:

To those who say it is not designed to deceive - it really is. If you asked 100 people in the street, half would think the same as this poster. Just because we on here are good with finances and maths does not mean everyone is.

There is a psychological draw to these high rates on regular savings, even though the actual gains are small.

When you invest money, surely you should carry out due diligence? So you understand profit and risk. If I don't fully understand a product, I don't invest. 

Albermarle

There is a psychological draw to these high rates on regular savings, even though the actual gains are small

I think what you describe is clever marketing . At least you get your money back unlike with many cleverly marketed financial products /scams.

gt94sss2

Beddie said:

To those who say it is not designed to deceive - it really is. If you asked 100 people in the street, half would think the same as this poster. Just because we on here are good with finances and maths does not mean everyone is.

There is a psychological draw to these high rates on regular savings, even though the actual gains are small.

Regardless of the type of savings account, interest is only accrued/paid on the daily balance.

You may think the gains are small but some regular saver accounts allow you to deposit £1,000+ a month and last longer than a year.

Bridlington1

Beddie said:

To those who say it is not designed to deceive - it really is. If you asked 100 people in the street, half would think the same as this poster. Just because we on here are good with finances and maths does not mean everyone is.

There is a psychological draw to these high rates on regular savings, even though the actual gains are small.

It's designed as a loss leader. They give you an account that pays 7% on £300 max per month and in return you are more likely to take out mortgages, credit cards etc with them in the future.

jak22

It's not that complicated nor is it deceiving as there's nothing that special about an RS account.

If you were to pay in £300 a month into any EA account paying 3.5% AER then you'd earn half the interest that you would in the RS account at 7%

Exodi

Beddie said:

To those who say it is not designed to deceive - it really is. If you asked 100 people in the street, half would think the same as this poster. Just because we on here are good with finances and maths does not mean everyone is.

There is a psychological draw to these high rates on regular savings, even though the actual gains are small.

Nothing better than figures plucked from thin air represented as facts, you didn't even say "I bet" or "I wouldn't be suprised if".

I'm not disputing that there are people that don't understand how it works (clearly this thread alone proves that), last week I responded on a thread where someone thought they could deposit a large amount into an account on the '365th' day to claim a years worth of interest (as they wrongfully assumed interest is calculated on the day).

But being ignorant is not a sufficient reason for banks having to painstakingly explain that annual interest is paid on money invested for a year, not for one day or one month.

Just on your last point: "There is a psychological draw to these high rates on regular savings, even though the actual gains are small."

Misleading, to say the least. Regular savers are ideal for people that don't have a large lump sum ready to invest at a moments notice - such as people saving money from their wages every month. In this situation, it is perfect.

7% is the best rate on the market. If £136.50 of free money is chump change to you, then I welcome you to find somewhere else you can put £300 a month and get more.

adindas

anakeimai said:

Love the advice on here, but can you clarify some maths please?  Currently FirstDirect offer a 7.0% rate on a Regular Savings Account.  By my maths, if I paid in £300.00/month for 12 months that would give me a return of £ 252.00.  Happy Days?!  No:

If you save £300 every month for 12 months and qualify for the 7.00% AER/Gross p.a. interest rate, you'll earn approximately £136.50 interest (gross). Interest is calculated daily and paid 12 months after you opened the account.

Can anyone explain this to a normal, non-accounts expert, please?  This seems designed to deceive to me 😔

This has come up many times in this forum.

The main point here is that the bank will not pay interest for the money which have not hit your accounts. This is simple calculator from MSE.

https://www.moneysavingexpert.com/savings/regular-savings-calculator/

Certainly if you already have £3,600 and there is an account paying 7% allow you to put that sum, it is a better alternative. But that alternative does not exist. As other people say paying 7% interest is actually a loss leader considering central Bank base Rate is 4.5%Interbank Rate is 4.69%.

They allow you to pay large sum but for less interest or they give you 7% but will only allow you to put £300 a month.

To take the best of both worlds is doing the so called drip-feeding from lesser to higher interest paying accounts and keep recycling it.

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

25_Years_On

anakeimai said:

Thanks all, but I'm still baffled.  In one month I'll have paid in £300.00 so why at 7% doesn't that give me £21?

Because 7% is the annual rate. In one month you will have earned approximately 1/12th of 7% (it will actually be calculated on the number of days in a month). If you were getting £21 for £300 in one month the annual interest rate would be something like 84%.

You will get £21 on the first £300 after one year.

Band7

Beddie said:

To those who say it is not designed to deceive - it really is. If you asked 100 people in the street, half would think the same as this poster. Just because we on here are good with finances and maths does not mean everyone is.

There is a psychological draw to these high rates on regular savings, even though the actual gains are small.

All such a survey would prove is that there are people who have not had the opportunity to learn about savings accounts and rates at school, or they have forgotten what they learnt / should have learnt. There is nothing deceptive about Regular Saver accounts.

Anyone who claims to be "not good with finances and maths" should probably stay clear of finances and maths - though I wonder how they could possibly cope with their earnings and spending throughout their lives.

Surely people would not expect to pay interest for money they have not borrowed (e.g. on a credit card or with a loan) - so why would anyone expect get interest for money they have not deposited? 

Moneyhelper have a good basic grounding about Regular Savers.