Metro Bank Instant Access Savings

tracyyi

the website said "

5.22% AER* Limited Edition Rate"

However, my Metro bank apps, said 5.10%AER. why there is a different?

refluxer

If it pays interest monthly, that's probably the gross monthly rate.

5.10% gross monthly = 5.22% AER. You can use this quick online calculator to check things like this.

lr1277

Sorry if I am stating the obvious.

The 5.22% assumes you keep any interest earned in the account to earn even more interest the following month.

If you withdraw some or all of the interest as it is paid, then the total inteest paid over the year will be less than 5.22%.

Say you put £1000 into the account.

In the first month you would earn £4.25 interest. which is based on £1000 + (1000 * 0.051/12)

If you withdraw that £4.25, you would be left with £1000 to earn inteest in the following month.

However if you kept the £4.25 in the account, the following month you would earn £4.26 on the £1004.25.

So and so forth until 1 year is up.

So if you keep all the interest in the account, after 1 year you would have £1052.20.

If you withdraw the interest as it is applied to your accout, you would have £1000 in the account and withdrawn a total of £51.

HTH

Edited to add: I don't know if Metro bank calculates interest daily or monthly. I have assumed monthly. Could be daily and so you would potentially earn a different amount each month depending on the number of days in the previous month and of course whether you had withdrawn the previous month's interest.

grumbler

I think it's a known and widely discussed error on Metro's side. AER can't be both 5.1% and 5.22%. I think 5.22% is the correct figure for AER.

boingy

Yeah, it's just an error in the app. 5.22% AER is the rate you get. I've got a comedy reply from them that says "As soon as this was discovered our team started working on a resolution to the issue but I am unable to give a timeframe for when this will be completed." Maybe each member of the team is responsible for a particular digit so they need to get together to change two digits at the same time. 

lr1277

I posted my previous reply because I was working on the condition the interest was paid monthly, as according to the Metro bank website.I used a spreadsheet to work out the amount of interest each month and it added upto something like £1052.209....

5.1% compounded over 1 year equates to an interest rate of 5.22%, (i.e. £1052.20) assuming you keep all interest in the savings account.

So my calculations said if you take the interest out as it is paid every month, you will withdraw £51 over the year.

If you keep the interest in the account, after 1 year you will have £1052.20.

Puzzled by Metro bank's response. Oh well. I am convinced by my reasoning. Upto others if it convnces them.

Edited to add: every month

refluxer

lr1277 said:

Puzzled by Metro bank's response.

They're just admitting that the displayed interest figure within online banking is incorrect - it either needs changing to '5.10% gross' or '5.22% AER'. Presumably it will be being calculated correctly, though.

lr1277 said:

Edited to add: I don't know if Metro bank calculates interest daily or monthly. I have assumed monthly. Could be daily and so you would potentially earn a different amount each month depending on the number of days in the previous month and of course whether you had withdrawn the previous month's interest.

Interest is calculated daily and paid monthly on this account, so yes - you'll get a slightly different amount each month if you maintain a constant balance.

lr1277

Thanks @refluxer

Both figures made sense to me based on whether the customer withdrew any interest paid.

grumbler

lr1277 said:

Thanks @refluxer

Both figures made sense to me based on whether the customer withdrew any interest paid.

They do make sense, but you can't call 5.1% "AER" because AER  "shows what you'd get over a year if you put money in the account and left it there" 
MSE: Interest rates

AmityNeon

lr1277 said:

Thanks @refluxer

Both figures made sense to me based on whether the customer withdrew any interest paid.

Gross = what you are paid (without tax deducted). The rate is 5.10% and is the figure used in calculations.

AER = what the rate would be if interest was paid once and compounded (interest on interest) annually. This is used to easily compare different products, especially those that pay interest at differing intervals or those that are held for terms other than one year.

The problem with Metro's app is that 5.10% AER is clearly lower than 5.22% AER. In online banking, the rate is just '5.10%' (no qualifier), which is sufficiently ambiguous to not be incorrect.

lr1277

On this page:

https://www.metrobankonline.co.uk/savings/products/instant-access-savings/ 

The following text is showing:

Grow your savings faster with our 5.22% AER*/5.10% Gross Limited Edition Rate (variable) for 12 months

So looks like the website is correct (based on above comments) and yet tha app is not, apparently.