7.0% actually 3.69%?

dgpur

I don’t get what confuses people. The money you put in is either new, say £300 from your monthly pay, which means you get the highest level of interest for that money, or it came from a lower paying easy access account, in which case you are earning not just the 7% on that money, but also what that £300 was earning previously. Either way you make way more interest for your money than if you just left it in/let it go to another easy access account. Only locking away for a year might get you a better deal, but only if it’s existing money, not new income.

TheBanker

cricidmuslibale said:

RG2015 said:

TheBanker said:

I think there is a psychological effect to the high rates. I think they're designed to attract attention - they are obviously loss-leaders for the banks otherwise they wouldn't limit the amount you can deposit.

But they also encourage customers to get into the savings habit. Many years ago I used to help school leavers open their first bank account (when having a bank account as a teenager was less common than now). If they were starting work I'd encourage them to set up a regular saver. I know this helped some of them to build up savings to pay for holidays, studies, or to avoid debt when something went wrong. I also opened bank accounts for healthcare professionals who'd come to the UK from abroad to work for the NHS. Again, a regular saver was a good addition to the current account to help meet unexpected bills. 

I was always much happier selling savings accounts than credit cards (which, at the time came with PPI )

It's a win-win situation - the customer gets a good rate, the bank gets a good customer. Nothing wrong with that. 

You could actually say that the banks should be praised for offering loss leading accounts to entice people into saving when they otherwise may not have done.

Far more of a win-win than a deceptive policy.

I agree with this very much!

I think many people who have a significant amount of savings but are not necessarily savvy savers all that often will probably be aware of 1 or 2 Regular Savings accounts, such as those offered by a big well-established bank or building society that they already have their money with. What they may not be aware of though is how many other good Regular Savers are also available for them to potentially utilise at the same time as the familiar 1 or 2 that they do know about and may well be already saving into.

If these sometimes non-savvy savers were to realise that that in total they could currently easily save £1000 and potentially a lot more each month into several Regular Savers paying at least 4% and up to 7% annual interest, then they would soon see how very beneficial indeed multiple Regular Savings accounts can be!

I think you have to remember that we on the Savings board are the exception, having the resources to fund multiple regular savers each month, and being able to drip feed from our instant access accounts etc. About a quarter of adults in the UK have no savings at all, and another quarter have less than £1,000. In that context, opening a Regular Saver and putting aside even £20 a month is a good thing.

housebuyer143

ForumUser7 said:

Your calculation appears to be (300x12) x 0.07. That would give you the interest for if you deposited £3,600 in the 7% account straight away at the start of the 12 months in one go - which is not permitted.

Rather you can deposit £300 each month for 12 months.

You will not get interest for the days funds are not in your account, hopefully that makes sense.

This calculator may help you to visualise it - https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

What site did you get the calculator from? This would be useful for other things. 

RG2015

housebuyer143 said:

ForumUser7 said:

Your calculation appears to be (300x12) x 0.07. That would give you the interest for if you deposited £3,600 in the 7% account straight away at the start of the 12 months in one go - which is not permitted.

Rather you can deposit £300 each month for 12 months.

You will not get interest for the days funds are not in your account, hopefully that makes sense.

This calculator may help you to visualise it - https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

What site did you get the calculator from? This would be useful for other things. 

Not sure I understand. The link to the site is on the post.

You need to click through to get here.

https://www.thecalculatorsite.com/finance/calculators/savings-calculators.php

ForumUser7

housebuyer143 said:

ForumUser7 said:

Your calculation appears to be (300x12) x 0.07. That would give you the interest for if you deposited £3,600 in the 7% account straight away at the start of the 12 months in one go - which is not permitted.

Rather you can deposit £300 each month for 12 months.

You will not get interest for the days funds are not in your account, hopefully that makes sense.

This calculator may help you to visualise it - https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

What site did you get the calculator from? This would be useful for other things. 

I found it on Google, the link to the calculator is in my post in this thread (the one you replied to). It sometimes returns marginally different results, but as you say, it is very useful!

jimjames

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.

I don't understand how it can be designed to deceive. I think anyone would understand that they don't get charged interest on the money they've paid off their mortgage balance. It's just the opposite of that.

redux

If there were enough of these regular savings accounts at the same rate that someone could have 12 of them, started at monthly intervals, and renew each on maturity, with the interest paid out to another account, the aggregate principal would be constant, and the interest paid would be the headline rate on the constant balance

But apart from that set of circumstances, the balance isn't constant, and you won't be paid interest on money that hasn't yet arrived. The last month's deposit gets about half a per cent, as it's been there only a month. The rest, regular intervals in between

What if the interest was £1 in the first month, £2 in the second, and so on, to £12 in the last. The sum of all the numbers from 1 to 12 is 78, not 144

n(n+1)/2

35har1old

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?

If the terms allowed you to deposit  £300 when  you first opened the account and make no further payments. At the end of term you would receive your £21
The 7% is for a year not per month

housebuyer143

The illustration literally tells you how much you will earn if you pay in £300 a month for a year. I don't think they are trying to deceive anyone.

Exodi

Band7 said:

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? 

Haha this was exactly my first thought when I read Beddie's comment.

We may see a thread pop up now and then of 'why did I not earn the AER on savings I've just deposited' - but I have yet to  ever see a thread of "I have a credit card with a £5,000 balance on it at 20% APR. Over the year I gradually cleared the credit card. By my Maths, £5,000 borrowed at 20% APR would give me an annual interest payment of £1,000, yet I only ended up paying about half of this."

I think is similar to the phenomenon where consumers are very quick to report when they've been overcharged for something, but less quick when they've been undercharged.