Which gives me the most?

WoodyMax

Sorry to ask such a basic question but I've never fully understood it.  If you have a fixed rate savings account that pays the interest either monthly or at maturity which pays more in the end?  I'm confused because the actual rate is usually slightly higher if you go for the annual option but then I've seen some people say go for the monthly interest back into the account because it is then compounded.
Would be so grateful if someone could put this to bed for me.

Thanks!

eskbanker

The reason the rates differ is indeed because of compounding, so the end result should be exactly the same, which is why there is a standardised AER (Annual Equivalent Rate) figure used for that very purpose, i.e. to implement a method of comparing interest earned regardless of payment frequency.

https://www.moneysavingexpert.com/banking/interest-rates/#save

Middle_of_the_Road

Generally, if the interest is paid monthly, and you don't withdraw it, it will be the same as the annual rate.

BooJewels

You've had the rate explained for you, so you know that bit now. Fixes that also offer monthly interest will often allow it to be paid away into a different account - which some savers like myself prefer as I can choose to spend it, or more often I just put it into a regular saver or other easy access account to continue compounding - but I now have access to it rather than in being locked away for 2 years or whatever.  It just reduces the amount of my money that's locked away out of reach. 

Some people just prefer to see their pot growing as they go along, rather that waiting a year to see the gain, so choose monthly interest so they can see it.