Best account for interest - how to calculate
I'm struggling to workout the best option on choosing a savings account depending on the interest rate and how it is calculated.
For example, I have two accounts as follows:
A. Has deposit of £10,000 and interest rate of 3.95%. Interest is calculated daily and added to account balance monthly. So in month 2 interest is paid on original deposit plus the interest paid at end of month 1 and so on. So I see this as a compounding interest account.
B. Has deposit of £10,000 and interest rate of 4.06%. Interest is calculated daily on cleared account balance, i.e. the £10,000, and is set aide to be paid into account annually on anniversary of opening. So, I see this as a simple interest account.
I will not add anything further to either account.
I don’t know how to work out which one will earn me most interest over the year. I am sure this is the same for many people and a calculation and/or explanation on MSE would be really useful to allow us to make the most of our savings.
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