Savings account: gross pa and AER interest

[edc]

Can anyone explain the difference between interest paid gross p.a and why bank's quote AER%?

Is AER the interest equivalent to the gross paid on compounded interest.

I have one account which pays 4.89% gross and 5.0% AER and another that pays 4.9% for both gross and AER? The former pays interest monthly and the latter pays yearly.

Which one yields the most?

[Lois]

I'm doing exactly the same at the moment. Spent ages the other night trawling through loads of bank sites.

Settled on ING with 5% AER 4.89 gross. p.a and 3.91 net pa!

However have just found an alliance and leicester one at 5.35% AER but think I found a catch with it

[Lois]

AER stands for annual equivalent rate and illustrates the interest rate if it was paid and compounded each year.

Gross per annum is the annualised rate before deduction of tax at standard rate.

Net per annum is the annualised rate after deduction of tax at standard rate.

[edc]

Thanks.

I have savings in ING and did transfer them from Halifax but may swap back again now!

ING pays monthly interest and Halifax yearly and I can't figure out which one will pay out more over the year (where all interest is paid into the account).

The Alliance account is a con cos if you withdraw money then you lose any accrued interest for that month.

[Lois]

I know ING calculates daily which is better for compound. The more often it's paid the better in my oppinion!

[minimax]

anonymous said:

[redacted]

absolutely right, gold star for lois

/patronising mode



>> Edited by minimax on Thursday 17th March 20:29

[Lois]