Interest Rates

[Ric.ror]

I have heard that some banks are now offering up to 7% so for each £1000 that would be £70 over the year or £5.83 per month but would that mean for 1st month interest is calculated on £1000 2nd month £1005.83 - or doesn't it work like that

Please bear in mind when I did sums at school it was pound's shillings and pennies 

[ToraToraTora]

Well this is more a question of when they add the interest. If they pay it each month then you are correct.

[barry1010]

That's how it works for me - it's called compound interest.

[barry1010]

Nicely explained here:

What is compound interest on savings?

Compound interest has a snowball effect in helping your savings grow. You’ll receive interest on your deposited amount, plus interest on the interest. 

Interest can be compounded daily, monthly, or quarterly. The more frequently interest is added to your balance, the faster your savings will grow.

The alternative is simple interest which is only paid on the principal or deposited amount.

https://www.moneysupermarket.com/savings/understanding-interest-guide/#:~:text=Interest%20on%20savings%20accounts%20is,the%20term%20of%20the%20account.

[ToraToraTora]

do they say when the interest is added?

[barry1010]

The only savings accounts that pay 7% at the moment, as far as I know, are regular savings accounts where you are usually limited to £200, maybe £300 a month.  Santander has a straight savings account linked to the Edge current account that pays 7% for one year - but only balances up to £4000

[barry1010]

If anyone does know of an account paying 7% I'd love to know about it

[ToraToraTora]

It probably has a minimum deposit time of n years or you get very little interest. Ric.or can you tell us the name and supplier of the account?

[barry1010]

My 7% Santander account has just reached it's one year so has dropped to 4.17%.  I've moved it my Coventry BS account paying 5.6% but would be quite happy to move it again

[newmodarmy]

A monthly saver paying 7% means if you pay in £500 a  month- £6000 by the end of the year- your average balance over the year is £3000 (well a fraction more if you pay at start of the month), so your annual interest will be close to 7% of £3000= £210. Some wrongly assume they'll get £420 interest

[Ric.ror]

I was told Chase and Yorkshire Building Society were offering 7%
I have a lump sum of £7k to invest and I'm hoping to add approx £400 per month.  I need approx £23k to pay my late mums care home bill to LA.  I currently have the money in premium bonds - well you've got to have a dream

[barry1010]

Yes, that catches quite a few people out. 

[barry1010]

I've just looked at Yorkshire BS and there highest rate is 5.75% on a regular saver for existing customers, saving up to £250 a month.  No large deposits.

Chase is offering 4.1% for customers who have a current account with them.

[barry1010]

Wade through this 

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

 

[ToraToraTora]

I'd put it in premium bonds, you may win a big prize and the dosh is safe and with 7k you'll get some small prizes at least. I won £100 today!

[ToraToraTora]

...add your £400 a month and re invest all winnings, set the whole thing up on line. It'll soon build up, the dosh is safe and you could win £1m.

[ToraToraTora]

sorry didn't see that you already have it in bonds, leav it there me old china!

[Old_Geezer]

As mentioned the period is vital. Adding interest every millisecond ramps up the total faster than doind it every decade.

 

That's why AER is indicated when checking saving schemes.