Help with Gross P.A/AER savings?

I_heart_bargains

Hi guys,

Im totally useless at numbers and im trying to understand if my savings account is any good.

Ive just opened an Alliance & Leicester Premier Current Account and a Plus Saver account has been opened up along with it.

Im just trying to understand whether the rate is good or whether i should put my savings elsewhere, which i was originally going to do.

My savings account has a rate of 5.25% Gross p.a/AER variable but as new customer a bonus of 0.75% payable til April 2009 will apply. So im assuming this means that my actual rate is 6%.

The only other thing is that im not sure of how per annum %'s work - if i put savings in say this month, when will i see the interest? Each month? Or does this mean it sits in there and i get it at the end of the year?
Apologies to sound stupid, i just struggle with all this interst malarky lol :eek:

Any help would be fab, thank you

Cherry

YorkshireBoy

You will earn interest each day at the gross p.a. rate divided by 365.

For monthly paying interest, the gross p.a. figure will be less that the AER (to allow for compounding...interest on interest). Your Premier current account pays interest monthly.

For annual paying interest, the gross p.a. figure will be the same as the AER figure. You still earn interest at the daily rate of gross.p.a. rate divided by 365, but instead of being paid each month it's paid once per year. The reason the two rates are the same is because compounding takes place once per year rather than once per month. Your PlusSaver pays interest once per year.

The AER figure shows what the rate would be if interest was compounded once per year, and is an illustrative figure only. It's this figure you should use to compare accounts...but you'll only achieve this rate on a monthly paying account if you leave leave your interest in the account to compound.

Lokolo

Also you will be taxed on the 6% unless you have filled an R85 form as you are exempt (if you are earning under your threshold).

So the actual will be: 4.8%.

Consumerist

I_heart_bargains wrote: »

Im just trying to understand whether the rate is good or whether i should put my savings elsewhere, which i was originally going to do.

My savings account has a rate of 5.25% Gross p.a/AER variable but as new customer a bonus of 0.75% payable til April 2009 will apply. So im assuming this means that my actual rate is 6%.

Check to see if the 5.25% rate they quote includes the bonus or not.

It is likely they will advertise their rates including any bonuses. If this is the case, then your rate may drop from 5.25% to 4.5% in April 2009 (this assumes that they don't change their variable rates before then).

HTH

Baldur

The current Plus Saver info certainly says "For new customers, rate includes a bonus of 0.75% payable to 30.06.09."