Santander Edge saving account interest

danny13579

friolento said:

Your calculations ignore that you can skim off the monthly interest and put it into another interest-bearing account. 

In the first example there wouldn't really be much point in doing that as you're getting 6.78% interest on your interest with Edge. 

In the second example you'll see that I have skimmed off the interest as each month the account balance is £4,000.

JohnSwift10

What is the equivalent interest rate if you put the full £4000 in the account and withdraw the interest every month and put the interest into an account paying 5% APR with the interest paid every month?

surreysaver

JohnSwift10 said:

What is the equivalent interest rate if you put the full £4000 in the account and withdraw the interest every month and put the interest into an account paying 5% APR with the interest paid every month?

It would be 5%.  The AER would be more than 5%, though 

surreysaver

jameseonline said:

I don't know how they can advertise it as 7% if they only pay monthly etc

Because they are required to advertise it as 7% by the regulatory body.
The reason for using AER is so there is a consistent figure to use when comparing accounts.
But when you have an account like this, which has a maximum amount which can earn the rate, it does make it a bit misleading.
Its the same with the NatWest/RBS Digital Savers - the rate is 6.17% until you get to £5k, then it drops to 6%.
If you're someone who keeps the maximum in the account, you're better off using the gross rate rather than the AER

But if an account pays interest monthly, at least the taxman gets less money! A reason to choose monthly interest over annual if you get the choice 

danny13579

JohnSwift10 said:

What is the equivalent interest rate if you put the full £4000 in the account and withdraw the interest every month and put the interest into an account paying 5% APR with the interest paid every month?

If you were to immediately withdraw your Edge interest every month and put it into an account paying 5% interest, you would make £7.46 interest in total on it after 1 year.

jameseonline

surreysaver said:

jameseonline said:

I don't know how they can advertise it as 7% if they only pay monthly etc

Because they are required to advertise it as 7% by the regulatory body.
The reason for using AER is so there is a consistent figure to use when comparing accounts.
But when you have an account like this, which has a maximum amount which can earn the rate, it does make it a bit misleading.
Its the same with the NatWest/RBS Digital Savers - the rate is 6.17% until you get to £5k, then it drops to 6%.
If you're someone who keeps the maximum in the account, you're better off using the gross rate rather than the AER

But if an account pays interest monthly, at least the taxman gets less money! A reason to choose monthly interest over annual if you get the choice 

Yea also Santander you can max straight away, NatWest/RBS you can't so they don't bother me as much rate wise

jameseonline

Got my 1st lot of interest today, £22.23 yay 😊