Zopa savings interest

Çlass37syphon

I have noticed that I received less interest on my monthly smart saver for May than I did for April 
This is despite having made more deposits and of course the compound interest on April's interest payment 
Zopa tried to explain this with days in one month longer than the other but as I say more deposits and compound interest should offset this 
You don't put money in the bank and expect a lower return when no withdrawals have been made 
Any thoughts pleaae?

gravel_2

Çlass37syphon said:

I have noticed that I received less interest on my monthly smart saver for May than I did for April 
This is despite having made more deposits and of course the compound interest on April's interest payment 
Zopa tried to explain this with days in one month longer than the other but as I say more deposits and compound interest should offset this 
You don't put money in the bank and expect a lower return when no withdrawals have been made 
Any thoughts pleaae?

What about March? Is it a new account? When did you open it and when did you pay in? What day is interest paid?

I have a stagnant Zopa account with nothing much in it. April was 90p, May was 88p.

eskbanker

Çlass37syphon said:

I have noticed that I received less interest on my monthly smart saver for May than I did for April 
This is despite having made more deposits and of course the compound interest on April's interest payment 
Zopa tried to explain this with days in one month longer than the other but as I say more deposits and compound interest should offset this 
You don't put money in the bank and expect a lower return when no withdrawals have been made 
Any thoughts pleaae?

Compound interest would be a trivially minuscule factor compared with more deposits, unless you were just paying in pennies.

Perhaps the best thing would be to post balances, deposits, and interest payments, so that we can have something to go on?

slinger2

Without knowing how much money you had in the account each day in each period, it's impossible for us to say. As noted, the Mar-Apr "month" was 31 days, while the Apr-May month was only 30 days. Obviously this is only a 3% difference but would explain the 90p/88p difference noted above.

refluxer

Çlass37syphon said:

I have noticed that I received less interest on my monthly smart saver for May than I did for April 
This is despite having made more deposits and of course the compound interest on April's interest payment 
Zopa tried to explain this with days in one month longer than the other but as I say more deposits and compound interest should offset this 
You don't put money in the bank and expect a lower return when no withdrawals have been made 
Any thoughts pleaae?

FWIW, interest query questions pop up on here fairly regularly and I've never seen one where the end result was that the bank had calculated it incorrectly, presumably because the calculations are automated and highly unlikely to be wrong. 

It's hard to say what's happening in your case without any specific figures and dates but, in order for the deposits you made to make a substantial difference to the latest interest payment, I'm guessing they'd have to be fairly large (relative to the balance) and made early in the month to offset the loss of a day's interest due to the latest month being shorter than the last.

slinger2

An annual interest rate of 5% means roughly 0.4% per month. So (other things being equal) you'd expect to get 0.4% more interest one month compared to the previous month. The 30/31 day issue is a 3.3% difference, so about 8 times greater.

Çlass37syphon

Thank you for all your helpful comments
Yes thinking logically it's more than there banking license is worth and they are governed by the financial authority
So the interest is always dated the 19th of the month on screen but not shown as paid in till the 20th. So can anyone advise how to check the days are correct or doi just count 31 days in May 

eskbanker

Çlass37syphon said:

Thank you for all your helpful comments
Yes thinking logically it's more than there banking license is worth and they are governed by the financial authority
So the interest is always dated the 19th of the month on screen but not shown as paid in till the 20th. So can anyone advise how to check the days are correct or doi just count 31 days in May 

If it's calculated on the 19th of each month then it's based on the number of days between, say, 20 April and 19 May inclusive, which will be 30, whereas 20 March to 19 April would have been 31.

You can validate the calculation with a simple spreadsheet, replicating the daily calculation with a row (or column) for each day, multiplying that day's balance by (gross interest rate / 365) and totalling the results.

slinger2

It's not an easy calculation but you can get a ballpark number using the daily interest rate and the daily balances (in your case 20 April to 19 May). For instance 5.08% AER = 4.96% Gross = 0.01359% per day. Suppose you had a £200 balance for the first 20 days, £100 balance for 5 days and £1000 balance for the last 5 days. The interest would be (roughly) = (200*20+100*5+1000*5)*0.01359% = £1.29. This ignores compounding during the month and any rounding that Zopa might do.

BooJewels

Just to illustrate the difference the days in a month can make, these are my monthly interest payments from a fixed saver, that pays the interest away to another account each month and so compounding isn't an issue, purely the rate of interest on a static balance/principle.  I'm paid on the 12th of the month, so each interest calculation spans the end of the preceding month.  The rate is 5.89% on £25k - so £4.034 per day.

January (31 days in December) £125.06
February (31 days in Jan) £125.06
March (29 days in Feb)  £116.99 (I would have expected £112.95 in a non-Leap Year)
April (31 days in March)  £125.06
May (30 days in April)  £121.03

ETA:  I don't have a Zopa account, so don't know how they work - but some organisations don't pay interest at weekends - so if your usual payment date falls at a weekend or bank holiday (19th May was a Sunday) they might pay on the nearest working day, but adjust the number of interest days accordingly.  I have 2 accounts that I can think of that do this - you might get 32 days one month and 29 the next.  It doesn't sound like this was the case here, but it is another factor that can occur.

eskbanker

slinger2 said:

It's not an easy calculation but you can get a ballpark number using the daily interest rate and the daily balances (in your case 20 April to 19 May). For instance 5.08% AER = 4.96% Gross = 0.01359% per day. Suppose you had a £200 balance for the first 20 days, £100 balance for 5 days and £1000 balance for the last 5 days. The interest would be (roughly) = (200*20+100*5+1000*5)*0.01359% = £1.29. This ignores compounding during the month and any rounding that Zopa might do.

There isn't any compounding during the month!