Savings Interest & Confused

zom247 · 19 Jan 2024 at 13:05

My CSE Maths is not cutting the mustard and I'm having trouble understanding the interest from a savings account I have.

It's a 12 month Regular Savings Account with First Direct with a rate of 7% AER/Gross. I've been saving £300 per month (the max) for 12 months with no withdrawals. Got the paperwork for it today and it only shows interest of £136.64. However, I calculate 7% of £3600 as £252. Am I being totally thick? I just don't understand their working out.

Grateful for all sarcastic comments

zom247 · 19 Jan 2024 at 13:16

Dis86 said:
Interest probs calculated monthly and you had lesser amounts in until you reached the full 3600.

Thanks, just found the paperwork from when I opened it and it says interest is fixed, calculated daily and credited at the end of the 12 month fixed term.

Still none the wiser though, perhaps this was why I never did pay & allowances when I was in the Army

zom247 · 19 Jan 2024 at 13:27

dlockers said:
on month 1 you had 300 quid, so 7% of 300
on month 2, you had 600 quid, 7% of 600
on month 3, you had 900 quid, so 7% of 900

That doesn't add up either, were you in the same school as me?

zom247 · 19 Jan 2024 at 13:33

Mr Jack said:
It doesn't add up because it's calculated daily, so the length of the months and the day you deposited makes a difference.

7% AER means that had you £3600 in your account on day one, you'd have £252 in interest at the end of the year. You didn't, you had a gradually increasing amount.

Thanks for all the help/answers but this explains it better to me. I naively thought the 7% would be calculated from the £3600 in my savings at the end, still better than previous interest rates though.

zom247 · 19 Jan 2024 at 14:16

200sols said:
If only you read what you signed up for

Literally the first line under the headline on the FD site.

Thanks for looking that up for me, us oldies need hand holding sometimes

zom247 · 23 Jan 2024 at 22:42

D-Ranged said:
If it was that easy, people would be remortgaging, dumping it all in savings on the last month of the year and pulling all the interest!

You can only put a max of £3600 (£300 per month) into the savings account I mentioned, no idea about any others.