Fixed rate isa

AcwaTerra

Hi
I am considering transferring my current low interest rate isa over to a fixed rate because i am happy to lock the money away for a year.
I have been offered 2 rates of interest from my provider.
5.82% for the year if i accept the interest at the end of the term
or, 5.67% if i accept the interest on a monthly basis.
According to my calculations using the interest calculator on MSE putting £64,600 away for the year would accrue me about £80 less if i accept the monthly interest figure over the yearly end of term figure.
Have i got that right? I assumed the monthly would compound and be equal to or greater than yearly, but I'm open to an explanation if someone can help with the information.
I'm simply trying to work out what is best to make my money work for me.
I look forward to hearing from you,

TiVo_Lad

You need to look at the AER (Annual Equivalent Rate) 5.67% monthly is 5.82% AER. 5.82% annually is 5.82% AER.

frugalmacdugal

Hi,

depends if you leave monthly interest in account to accumulate or withdraw monthly.

ColdIron

5.67% gross is 5.82 AER

You don't say who the provider is so it's hard to be definite but my guess is that as this is a fixed term you cannot deposit the monthly interest, it will be paid away, so not compound

If you want to lock this away and don't want a monthly income choose the annual option

AcwaTerra

The monthly interest would be left in the account until the end of the term and then i'll look for another. I will not be withdrawing interest or depositing it elsewhere.
The account is with paragon.

ColdIron

AcwaTerra said:

The account is with paragon.

The T&Cs state

• 13 Your interest can be paid into your Fixed Rate Cash ISA, to another account you hold with Paragon (subject to the Product Terms and Conditions of that account), or to the nominated bank account you have set up.

Annual interest would be 5.82% AER/Gross, monthly 5.67% Gross which will compound to 5.82% AER so no difference. If you like seeing the interest rolling in monthly choose monthly, otherwise annual

https://www.paragonbank.co.uk/resources/paragonbank/documents/savings/one-year-fixed-isa-terms-and-conditions