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  • FIRST POST
    • steveinkent
    • By steveinkent 14th Mar 18, 10:28 AM
    • 9Posts
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    steveinkent
    When does interest accrue in a cash ISA?
    • #1
    • 14th Mar 18, 10:28 AM
    When does interest accrue in a cash ISA? 14th Mar 18 at 10:28 AM
    Hi

    Forgive the somewhat naive question, but if I put an additional 8000 into my cash ISA before year end now, will that still accrue interest? I'm not clear on whether funds accrue interest over time, or if it's the total amount in the ISA at the end of the tax year...?

    Thanks
    S
Page 1
    • MallyGirl
    • By MallyGirl 14th Mar 18, 10:32 AM
    • 2,688 Posts
    • 7,692 Thanks
    MallyGirl
    • #2
    • 14th Mar 18, 10:32 AM
    • #2
    • 14th Mar 18, 10:32 AM
    A cash ISA is just a savings account. If you put 8k in 1 day before the end of the tax year, and interest is added yearly at end of tax year, then you will earn one day's worth of interest.
    • Tom99
    • By Tom99 15th Mar 18, 3:33 AM
    • 2,075 Posts
    • 1,399 Thanks
    Tom99
    • #3
    • 15th Mar 18, 3:33 AM
    • #3
    • 15th Mar 18, 3:33 AM
    The amount you deposit will accrue interest on a daily basis starting the day after your deposit but interest is only credited to the account usually once a month or yearly.

    Both monthly or yearly interest can be credited either on the anniversary of the account opening or on a date fixed by the bank.

    You can sometimes choose if you want interest credited monthly or yearly but you normally cannot choose the date in the month or year.
    • bostonerimus
    • By bostonerimus 15th Mar 18, 12:12 PM
    • 1,834 Posts
    • 1,174 Thanks
    bostonerimus
    • #4
    • 15th Mar 18, 12:12 PM
    • #4
    • 15th Mar 18, 12:12 PM
    The frequency of interest accrual (ie growth) is one of the great maths problems. It's better to have the interest credited as often as possible.....so x/12% every month is better than x% every year. Out of this (1+1/n)^n as n increases drops e ie 2.7182..............and this governs natural growth and decay so you find it in things like the rate of plant growth and radioactive decay too.
    Misanthrope in search of similar for mutual loathing
    • RG2015
    • By RG2015 15th Mar 18, 12:30 PM
    • 1,222 Posts
    • 713 Thanks
    RG2015
    • #5
    • 15th Mar 18, 12:30 PM
    • #5
    • 15th Mar 18, 12:30 PM
    The frequency of interest accrual (ie growth) is one of the great maths problems. It's better to have the interest credited as often as possible.....so x/12% every month is better than x% every year. Out of this (1+1/n)^n as n increases drops e ie 2.7182..............and this governs natural growth and decay so you find it in things like the rate of plant growth and radioactive decay too.
    Originally posted by bostonerimus
    Sounds a bit like Zeno's tortoise paradox. I never understood that either.

    However, I do know that rubbish % of anything close to my capital tends towards rubbish yield.
    • eskbanker
    • By eskbanker 15th Mar 18, 1:23 PM
    • 7,167 Posts
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    eskbanker
    • #6
    • 15th Mar 18, 1:23 PM
    • #6
    • 15th Mar 18, 1:23 PM
    The frequency of interest accrual (ie growth) is one of the great maths problems. It's better to have the interest credited as often as possible.....so x/12% every month is better than x% every year.
    Originally posted by bostonerimus
    Mathematically that's true but in the context of real-world interest payments, providers will typically be working back from an AER figure and using a lower gross percentage for any frequency more regular than annually, so as to negate the compounding effect you refer to.

    Hence the Nationwide FlexDirect for example, with a 5% AER - as it credits interest monthly, those payments are based on a gross rate of 4.89%, which will compound up to the full 5% over the year (whereas if they offered annual interest it would be at the full 5%).

    Didn't follow the rest of your post about dropping Es, I don't think MSE would condone such behaviour....
    • bostonerimus
    • By bostonerimus 15th Mar 18, 4:54 PM
    • 1,834 Posts
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    bostonerimus
    • #7
    • 15th Mar 18, 4:54 PM
    • #7
    • 15th Mar 18, 4:54 PM
    Mathematically that's true but in the context of real-world interest payments, providers will typically be working back from an AER figure and using a lower gross percentage for any frequency more regular than annually, so as to negate the compounding effect you refer to.
    Originally posted by eskbanker
    Good point, in reality I'm sure the banks will adjust the numbers to their benefit.
    Misanthrope in search of similar for mutual loathing
    • bostonerimus
    • By bostonerimus 16th Mar 18, 4:03 AM
    • 1,834 Posts
    • 1,174 Thanks
    bostonerimus
    • #8
    • 16th Mar 18, 4:03 AM
    • #8
    • 16th Mar 18, 4:03 AM
    Didn't follow the rest of your post about dropping Es, I don't think MSE would condone such behaviour....
    Originally posted by eskbanker
    (1+1/n)^n as n tends to infinity approaches the value 2.781......(it goes on forever) and this is called "e" or Euler's number.
    Misanthrope in search of similar for mutual loathing
    • Zero Sum
    • By Zero Sum 16th Mar 18, 4:14 PM
    • 373 Posts
    • 282 Thanks
    Zero Sum
    • #9
    • 16th Mar 18, 4:14 PM
    • #9
    • 16th Mar 18, 4:14 PM
    The frequency of interest accrual (ie growth) is one of the great maths problems. It's better to have the interest credited as often as possible.....so x/12% every month is better than x% every year. Out of this (1+1/n)^n as n increases drops e ie 2.7182..............and this governs natural growth and decay so you find it in things like the rate of plant growth and radioactive decay too.
    Originally posted by bostonerimus

    Monthly rates are always a bit lower to take this into account.
    • 2010
    • By 2010 16th Mar 18, 6:44 PM
    • 4,188 Posts
    • 3,339 Thanks
    2010
    Interest is added on the date it says on the T&C.

    An example of a Virgin one year fix it`s the 5th Aug.
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