First Direct Regular Savings Account

Lolaterrier

I have a regular savings account with First Direct with a 7% AER/Gross p.a. interest rate.  You could only put a maximum of £300 per month (which I did) and the interest was payable after 1 year.  I assumed it would be 7% of the total (£3600) which I calculated as £252 but they have only paid me interest of £136.50.  I have queried it with them but they say it is calculated on a daily basis and is correct.  What am I missing?!

ColdIron

You are missing the fact that you didn't have a balance of £3,600 for a year, No one will pay you interest on money that is not in your account

Read this

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts

And this (Key Product Info - What would the estimated balance be after 12 months based on 12 monthly deposits of £25 and £300?)

https://www.firstdirect.com/savings-and-investments/savings/regular-saver-account/

surreysaver

Lolaterrier said:

I have a regular savings account with First Direct with a 7% AER/Gross p.a. interest rate.  You could only put a maximum of £300 per month (which I did) and the interest was payable after 1 year.  I assumed it would be 7% of the total (£3600) which I calculated as £252 but they have only paid me interest of £136.50.  I have queried it with them but they say it is calculated on a daily basis and is correct.  What am I missing?!

You haven't got £3,600 in it for a year.  You've only got £300 in it for a year, then another £300 for eleven months, then another £300 for ten months etc, until you get to the final month when you have £3,600 in it for a month.
The average balance over the course of the year is £1,950, and that is what they pay 7% on.

boingy

It's kinda what forums are for - answering questions regardless of whether they have been asked before.
It happens on every single forum on every single subject. Being snarky to a newbie is pointless.

Regular savers are a particular source of confusion because the banks are obliged to publish an AER on something that has a monthly deposit limit. It's a really easy error to multiply the monthly amount by 12 and expect the full AER on that amount. No point getting upset about those posts. Reply politely or ignore them.

Lolaterrier welcome to the forums. You are not the first to be surprised by regular savers! 

surreysaver

The NatWest and RBS regular savers (Digital Savers) pay interest monthly. Perhaps others should too, as its much more obvious how they work then

Jami74

simonsmithsays said:

Not a criticism of the OP (as it comes up time and time again) but a genuine query on what's taught at school nowadays.

We were taught, in Secondary School Mathematics, things like simple and compound interest, how to complete a cheque etc 

Do 21st century basic finance get taught nowadays for those that want to learn?

Genuine question 

No idea what is taught in schools nowadays. I expect the National Curriculum is online somewhere. 

I'm pretty sure I was taught something about simple and compound interest at secondary school but didn't really understand it at the time. I went back to college years later and then on to university to get a science degree (so I'm not completely stupid or uneducated). I had the same question as the OP in the beginning, can't remember if I posted it or just read other peoples threads. A few years have passed and now I understand about savings accounts and interest and ISA's and stoozing and bank switches etc etc. So thank-you to all those posters over the years who have explained in simple terms what might seem like basic questions to those in the know.

Some peoples financial education starts right here on this forum.

35har1old

surreysaver said:

The NatWest and RBS regular savers (Digital Savers) pay interest monthly. Perhaps others should too, as its much more obvious how they work then

I think you would still get questions  asked about the above account
First direct gives you a estimate what you would earn in the summary before application 

wiseonesomeofthetime

35har1old said:

surreysaver said:

The NatWest and RBS regular savers (Digital Savers) pay interest monthly. Perhaps others should too, as its much more obvious how they work then

I think you would still get questions  asked about the above account
First direct gives you a estimate what you would earn in the summary before application 

As does every financial savings product provider that I have ever taken out, albeit most just base it per £1,000.

Unfortunately, not everyone reads the literature that comes with financial products they open, which leads to misunderstandings down the line.

That's where forums, and helpful responders, come into the fore.

I see the OP's question posted a lot, I have just learned to "scroll on". 

Bigwheels1111

Never sign up to something you don’t understand.
As stated above they tell you upfront what the interest will be.
One year they paid me £1.13p less than the figure quoted.
I call and was given the £1.13p, so I was happy.

Lolaterrier

Thank you for all those who left helpful comments, I appreciate the explanation!