Bradford and Bingley Interest rates

barryd999

Hi

My wife recently opened a Bradford and Bingley Internet Saver 2 account after seeing it on this site as one of the recommended esaver accounts. Her interest rate after tax should be 4.78% per month. On the £40000 she invested she calculated this to be £191 but her first full month of interest earned just £163. My wife calculated the interest by simply multipying 40000 x 4.78% to get £191. When she rang the bank they said the formula should be £40000 x 4.78 divided by 365 and then multiplied by the days in the month. This calculation does actually work out to £163 which is what they have paid.

Have we just been a bit thick with our calculations and is this the way all banks calculate interest or should we move to a better account?

Meltdown_2

barryd999 wrote: »

Her interest rate after tax should be 4.78% per month.

Er, seems highly unlikely ... That would equate to a very high annual rate (AER).

On the £40,000 she invested she calculated this to be £191 but her first full month of interest earned just £163.
My wife calculated the interest by simply multiplying £40,000 x 4.78% to get £191.

Doing that calculation, she should have got £1912. (4.78%=0.0478)

When she rang the bank they said the formula should be £40,000 x 4.78 divided by 365 and then multiplied by the days in the month.

Well, no ... Not unless they said 4.78% or 4.78/100; and if they did, then 4.78% is an annual net rate, not a monthly net rate.

This calculation does actually work out to £163 which is what they have paid.

If you take the number of days in the month to be 31 (are we talking about March?) then you would get £162.39 - if you have been paid £163 then they have rounded it up somewhat.

Have we just been a bit thick with our calculations

'not familiar with the terminology and methods' would be a better way of putting it ...

and is this the way all banks calculate interest or should we move to a better account?

Most (all?) banks calculate interest on a daily basis (it makes their lives easier), and then pay it at (or towards) the end of the month (or year, depending on the account).
I would expect this to be specified somewhere in the account T&C (Terms & Conditions).