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By *oodmess OP Man
over a year ago
yumsville |
Hey, could anyone help me with a formula that tells me how to work out 2.5% interest rate over 12 months as I am bamboozled.
The account says £100 over 12 months with a £100 monthly deposit = £1215 with 2.5% interest.
I can see no hidden fees?
Thanks.. |
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By (user no longer on site)
over a year ago
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So you are borrowing £100 over 12 months at 2.5%
In the real world that would be
will be £8.45 per month
The total amount repayable will be £101.34, therefore the loan will cost you £1.34
There must be some hidden fees..sounds like a very expensive payday loan ..
Thats if I understood your question |
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By (user no longer on site)
over a year ago
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Oh right ..so they are paying you 2.5% interest
Well that works out at, you get £2.50 for every £100 in your account each year ..but you might have to put a minimum amount in each month to keep getting it |
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By (user no longer on site)
over a year ago
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Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!  |
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"No it's a savings account not a loan. The account is not to be withdrawn on, that is more or less the only stipulation. "
Is that £100 per month deposit? £100 x 12 months = £1200 and it depends if the 2.5% is simple or compound.
Shop around and see if you can get a better deal. |
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By (user no longer on site)
over a year ago
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"Ah, to clarify.
£100 deposit each month over 12 months at 2.5% interest = £1215. "
So it saying at the end of 12 months after paying in each month £100=£1200 over the 12 months the total interest you will receive will be £15 |
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By *oodmess OP Man
over a year ago
yumsville |
"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense! "
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA. |
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By (user no longer on site)
over a year ago
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"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA. "
Thats it..hope you feel sorted out now lol |
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By *oodmess OP Man
over a year ago
yumsville |
"No it's a savings account not a loan. The account is not to be withdrawn on, that is more or less the only stipulation.
Is that £100 per month deposit? £100 x 12 months = £1200 and it depends if the 2.5% is simple or compound.
Shop around and see if you can get a better deal. "
I do actually have bad maths, I don't understand compound, sorry. Didn't think 2.5 was too bad. I was mulling feeding it from an ISA and then opening a new ISA 2019 with anything gained. |
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By *amissCouple
over a year ago
chelmsford |
"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA. "
If you make a larger deposit, then yes it would be better, as you are earning interest on a higher amount, sooner. You only earn interest on what you've paid in, each month and thus your balance each month, which will then be accrued and applied at the end of the year.  |
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By *oodmess OP Man
over a year ago
yumsville |
"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA.
If you make a larger deposit, then yes it would be better, as you are earning interest on a higher amount, sooner. You only earn interest on what you've paid in, each month and thus your balance each month, which will then be accrued and applied at the end of the year. "
Thanks for bouncing that. I was glazed over. |
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By *amissCouple
over a year ago
chelmsford |
"No it's a savings account not a loan. The account is not to be withdrawn on, that is more or less the only stipulation.
Is that £100 per month deposit? £100 x 12 months = £1200 and it depends if the 2.5% is simple or compound.
Shop around and see if you can get a better deal.
I do actually have bad maths, I don't understand compound, sorry. Didn't think 2.5 was too bad. I was mulling feeding it from an ISA and then opening a new ISA 2019 with anything gained. "
It is a good rate, as interest rates are crap at the moment, but with monthly deposits, as I explained, you only earn interest on each end of month balance, so for instance, month one , £100 x 2.5%, divide by 12, as the interest is for 12 months, that's your first month's interest and so on. |
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By *amissCouple
over a year ago
chelmsford |
"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA.
If you make a larger deposit, then yes it would be better, as you are earning interest on a higher amount, sooner. You only earn interest on what you've paid in, each month and thus your balance each month, which will then be accrued and applied at the end of the year.
Thanks for bouncing that. I was glazed over."
You're welcome. It's difficult to explain. It is a good rate, but better if you can deposit a larger amount, initially. I don't think isa's are that great at the moment, yes they are tax free, but normal taxpayer can now earn £1000 per year before tax, depending on your tax status, of course. |
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By (user no longer on site)
over a year ago
|
"Just to check is this a savings account as you mentioned the word deposit?
If so the 2.5% is likely to be an annual rate of interest. For example if you had exactly £1200 in the account for a whole year you'd get £30 in interest at the end of it.
As you are paying in monthly £100 you will receive less than £30 in interest as your balance will be £100 in the first month and that would earn roughly 31p (£100 ÷ 100 x 2.5 to get the yearly interest and then ÷ 12 to get that first months interest).
I hope this makes sense!
Yes, apologies, I thought I'd make the post short but helped to confused it in the process.
It is paid annually, fixed term at 2.5%. I could get the interest to £30 annual but couldn't understand how their example worked to £1215. So really all the interest applied on the year - if I have that right?
If I made a large deposit at the start would that offset? I am considering the benefits instead of an ISA.
If you make a larger deposit, then yes it would be better, as you are earning interest on a higher amount, sooner. You only earn interest on what you've paid in, each month and thus your balance each month, which will then be accrued and applied at the end of the year. "
This . Will also be worth checking what their terms are for the deposit each month. As you might not earn interest on a certain month if you don't pay in a certain amount. |
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"No it's a savings account not a loan. The account is not to be withdrawn on, that is more or less the only stipulation.
Is that £100 per month deposit? £100 x 12 months = £1200 and it depends if the 2.5% is simple or compound.
Shop around and see if you can get a better deal.
I do actually have bad maths, I don't understand compound, sorry. Didn't think 2.5 was too bad. I was mulling feeding it from an ISA and then opening a new ISA 2019 with anything gained.
It is a good rate, as interest rates are crap at the moment, but with monthly deposits, as I explained, you only earn interest on each end of month balance, so for instance, month one , £100 x 2.5%, divide by 12, as the interest is for 12 months, that's your first month's interest and so on. "
Basically it works out at interest of 21p for every £100 you put in per month. I make that a yearly total of £16.26 if you put in £100 per month |
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By *oodmess OP Man
over a year ago
yumsville |
"No it's a savings account not a loan. The account is not to be withdrawn on, that is more or less the only stipulation.
Is that £100 per month deposit? £100 x 12 months = £1200 and it depends if the 2.5% is simple or compound.
Shop around and see if you can get a better deal.
I do actually have bad maths, I don't understand compound, sorry. Didn't think 2.5 was too bad. I was mulling feeding it from an ISA and then opening a new ISA 2019 with anything gained.
It is a good rate, as interest rates are crap at the moment, but with monthly deposits, as I explained, you only earn interest on each end of month balance, so for instance, month one , £100 x 2.5%, divide by 12, as the interest is for 12 months, that's your first month's interest and so on.
Basically it works out at interest of 21p for every £100 you put in per month. I make that a yearly total of £16.26 if you put in £100 per month "
Thanks. I'm just looking over the possible accounts available. For the money I'd put in and get out, I don't think it's really be worth me opening it. |
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You also ought to check whether it has a notice period for withdrawal (basically, the shorter the notice you need to give, the worse the rate) and what the rules are for the rate changing. Some of the best deals currently are introductory offers only, and drops soon after. |
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By (user no longer on site)
over a year ago
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Wait, isn’t the interest added per month? If it is then the maths problem you’re looking at will differ each month, assuming you keep up paying £100 in each month on the dot and don’t waver amounts then the first month is 2.5% of £100 but the second is 2.5% of £200 ect until you’re at £1200 in the 12th month, unless it’s one lump of 2.5 at the end of the year, if it’s per month you come off better so fingers crossed it is  |
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By (user no longer on site)
over a year ago
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"Jeez, can we just stop talking about compound interest and get back to the filth....
Thank you.
"
I was hoping my answers on this were going to temp Rachel Riley to get in touch! |
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By (user no longer on site)
over a year ago
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Wait, I have that wrong, the second month would be the £100 you’ve put in plus the 2.5 they’ve already given gig plus the second £100 you’ve added so you’ll gain interest on £202.50 in the second month
Does that make sense? |
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By *oodmess OP Man
over a year ago
yumsville |
"Wait, isn’t the interest added per month? If it is then the maths problem you’re looking at will differ each month, assuming you keep up paying £100 in each month on the dot and don’t waver amounts then the first month is 2.5% of £100 but the second is 2.5% of £200 ect until you’re at £1200 in the 12th month, unless it’s one lump of 2.5 at the end of the year, if it’s per month you come off better so fingers crossed it is "
That is why I couldn't figure out the total in the example they gave at end of year being £1215. It is fixed at 2.5% per month, total interest paid on the annum. If you make payments per month you gain interest on each deposit, so it must add to more than £15 for the year. Again there were no charges for the account, but I think I'll put the money elsewhere as much as 2.5% is the best I've seen. |
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OP if you are comparing the account you have been offered to an ISA then your deal is the better choice.
In April my ISA paid out £1.22 interest on a savings balance of over £1500 with RBS. I don't worry too much about the interest rate I'm getting, I just need a separate account to keep my money with instant access if I need it. |
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By *ldguyMan
over a year ago
ongar |
"Ah, to clarify.
£100 deposit each month over 12 months at 2.5% interest = £1215. "
AER or APR monthly compound interest? or one off annual interest?
2.5% = £2.50 for every £100 invested.... you do the math  |
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By *oodmess OP Man
over a year ago
yumsville |
"OP if you are comparing the account you have been offered to an ISA then your deal is the better choice.
In April my ISA paid out £1.22 interest on a savings balance of over £1500 with RBS. I don't worry too much about the interest rate I'm getting, I just need a separate account to keep my money with instant access if I need it."
That was better than the 1% mine did. |
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By *ldguyMan
over a year ago
ongar |
"OP if you are comparing the account you have been offered to an ISA then your deal is the better choice.
In April my ISA paid out £1.22 interest on a savings balance of over £1500 with RBS. I don't worry too much about the interest rate I'm getting, I just need a separate account to keep my money with instant access if I need it.
That was better than the 1% mine did. "
1% on £1500 =£15 think you will find £1.22 is less  |
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By *r TriomanMan
over a year ago
Chippenham Malmesbury area |
If it's 2.5% interest per mounth compounded, that's £100 × 1.025 = £102.5 for month 1
Then (£102.5 + £100) × 1.025 = £207.56 for month 2 and so on - compound is basically interest on the interest.
After 12 months I calculated it to be £1,239.21
Not sure what they've got £1215.00 from, maybe some sounding down in the bank's favour. |
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By (user no longer on site)
over a year ago
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Be shocked if it's 2.5% a month. Likely to be the annual rate as mentioned earlier by several. If it is 2.5% per month, it's a brilliant rate in current climate so would snap it up. |
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By *amissCouple
over a year ago
chelmsford |
"Be shocked if it's 2.5% a month. Likely to be the annual rate as mentioned earlier by several. If it is 2.5% per month, it's a brilliant rate in current climate so would snap it up."
Also it's likely the interest is accrued monthly but not given until the 12 months, so you don't earn interest on interest, only on capital invested |
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