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Monthly Interest vs At Maturity
c129876
Posts: 33 Forumite
Is there a calculation I can do to compare putting savings into either, (1) an account paying interest on maturity, vs (2), a slightly lower interest rate account paying interest monthly?
And presumably, if you're having to pay tax on savings, you would then deduct 20% off of any calculated total for option 2?
And presumably, if you're having to pay tax on savings, you would then deduct 20% off of any calculated total for option 2?
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Comments
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AER (Annual Equivalent Rate) is designed specifically to allow like-for-like comparison, incorporating the effects of compounding, so use that to evaluate.
Tax may be an issue if you've used your personal savings allowance, but would apply for both options, albeit in different ways if you're thinking of a multi-year product that would defer its impact until maturity.1 -
If it's the same account and you don't withdraw monthly interest, the result will be the same.
If it's different accounts, compare AERs (Annual Equivalent Rate).2
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