ISAs: monthly interest vs annual

warnski

Hi everybody,

excuse my ignorance but I was just wondering... do most ISA providers offer the choice of monthly or annual interest payments? And if so, how great is the benefit of tying yourself to the one provider for a year? Is there much greater interest to be earned?

just a general query, thanks for your time

jem16

Probably the majority offer annual interest. However it does not tie you in for a year just to get your interest. If you decide to move your interest is calculated and added as you close your account.

billinge

But which is best to ask for, Monthly interest or Annual?
thanks
Billinge

Baldur

billinge wrote: »

But which is best to ask for, Monthly interest or Annual?

That depends on you - the AER (rather than gross interest rate) is usually the same whichever you choose, as long as you are leaving the cash in the ISA for a whole year.

Paul_Herring

There is nothing to be gained either way if you hold for a year (they adjust the gross rate for monthly such that the end amount would be the same as the yearly.)

You lose out by pence/£1000 if you ask for monthly and leave part way though. See http://spreadsheets.google.com/pub?key=pNBpCyyhhED0L42bCUZCgWA - green column. (See total for July - just under 1/2 of what you'd expect for 1/2 a year.)

warnski

cheers folks!