Is isa interest paid monthly into isa account compounded?

septictank

Hi there. My new smart cash isa with Zopa pays monthly interest into this isa account. I cannot find out anywhere if the interest earned and paid in each month is then compounded with the principal. Or is it only the principal amount which accrues interest? I do understand that any interest paid does not form part of my allowance. 

refluxer

Yes, monthly interest in a Zopa fixed rate ISA that is paid into the account will compound so you'll be earning interest on any interest paid in and will ultimately achieve the stated AER figure each year.

eskbanker

If the quoted AER is higher than the gross interest rate then yes, the interest compounds.

septictank

It is not a fixed rate Isa. It's a flexible easy access Isa. Does that make a difference?

refluxer

septictank said:

It is not a fixed rate Isa. It's a flexible easy access Isa.

OK, not sure why I presumed that but interest earned within an easy access cash will compound in the same way.