Bank of Scotland advertising a savings AC as 4.0%EAR. EAR or AER or typo?
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hattrick_12a
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Re: Aer/ear
Appreciate any feedback on this, as I have read through the various posts on this, but it is still a bit unclear
So these are all the same, but why do diferent banks use the different terminology? Is it just internal bank stuff but to the consumer it's the same.
There is also APR which is probs the same, but sometimes you would see it beside a CAR/EAR rate.
Below are examples of EAR/CAR with Gross given beside it? Is Gross before tax(i.e. DIRT)?
EG.
EAR
[broken link removed]
CAR (Compound Annual Rate)
[broken link removed]
[broken link removed]
Here First Active offer
Whats the CAR rate here then when it goes from 2.48(Gross Interest Rate Quarterly) to 2.50%(CAR)
So is fair to say that most saving account apply interest annually. Northern rock I think apply theres monthly?
So the interest applied monthly is better then it being applied yearly? Sometimes it dosen't explicitly state this.
Appreciate any feedback on this, as I have read through the various posts on this, but it is still a bit unclear
So these are all the same, but why do diferent banks use the different terminology? Is it just internal bank stuff but to the consumer it's the same.
There is also APR which is probs the same, but sometimes you would see it beside a CAR/EAR rate.
Below are examples of EAR/CAR with Gross given beside it? Is Gross before tax(i.e. DIRT)?
EG.
EAR
[broken link removed]
CAR (Compound Annual Rate)
[broken link removed]
[broken link removed]
Here First Active offer
Is this compounded quarterly (e.g. 100 at first quarter + 0.10% =100.10 going into the second quarter. Therefore quarter 2 you have 100.10 at second quarter + 0.10% =100.21.... )?
Whats the CAR rate here then when it goes from 2.48(Gross Interest Rate Quarterly) to 2.50%(CAR)
So is fair to say that most saving account apply interest annually. Northern rock I think apply theres monthly?
So the interest applied monthly is better then it being applied yearly? Sometimes it dosen't explicitly state this.
APR is Annual Percentage Rate and applies only to loans.
CAR/EAR/AER apply to deposit accounts and are (as far as I can tell) the same thing.
In the case of the FA account, the annual interest of 2.48% is treated as if it was added to the account quarterly.
2.48% / 4 = 0.62% each quarter
1.0062 * 1.0062 * 1.0062 * 1.0062 = 102.50% after four quarters, which implies 2.50% per annum.
Northern Rock allow you to choose to receive interest monthly or annually. The annual rate is better. The only reason you'd choose monthly was if you wanted to draw a monthly income from the account.
CAR/EAR/AER apply to deposit accounts and are (as far as I can tell) the same thing.
In the case of the FA account, the annual interest of 2.48% is treated as if it was added to the account quarterly.
2.48% / 4 = 0.62% each quarter
1.0062 * 1.0062 * 1.0062 * 1.0062 = 102.50% after four quarters, which implies 2.50% per annum.
Northern Rock allow you to choose to receive interest monthly or annually. The annual rate is better. The only reason you'd choose monthly was if you wanted to draw a monthly income from the account.
hattrick_12a
Registered User
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Wow an income from your deposit Account
. That would be great!! Appreciate that I am starting to get this, thanks.
So NR offer 3.75%/12=0.3125% per month. So then, if you had a 1,000 in there at the start the Interest that NR would pay into your account would be 1000*0.3125%(0.003125) = 3.125 euro after the 1st month and this would be added to month 2 so your interest would be earning interest as such and so on.
So I presume Rabo is the same only it dosn't pay the interest monthly but does apply it monthly(as it is CAR) and pays it annually??
If the 1000 was there for the whole year would the result be as simple as 3.75% * 1000 = 37.50 growth for the year or would it be less or more?
In fact just done it there and got 1038.151293, so it would be slightly more, but I guess this would have to do with the decimal places that I used, or that they might use? Or Is that the whole idea with CAR that it's more accurate in that it calculates the interest earning interest as opposed to just multiplying a firgure by the interest rate.
Also, so you could receive the better offer of interest rate and receive it annually (But calculated monthly as that is what CAR does). Or you could pay the interest to a nominated account, which is good.
But would earning the higher rate and taking out a sum every month be better than taking out the interest every month? As after all you would be earning a higher rate, but I suppose you would be losing the potential growth of the sum that you are taking out? That would be some calculation....Anyone..Anyone...
. That would be great!! Appreciate that I am starting to get this, thanks.So NR offer 3.75%/12=0.3125% per month. So then, if you had a 1,000 in there at the start the Interest that NR would pay into your account would be 1000*0.3125%(0.003125) = 3.125 euro after the 1st month and this would be added to month 2 so your interest would be earning interest as such and so on.
So I presume Rabo is the same only it dosn't pay the interest monthly but does apply it monthly(as it is CAR) and pays it annually??
If the 1000 was there for the whole year would the result be as simple as 3.75% * 1000 = 37.50 growth for the year or would it be less or more?
In fact just done it there and got 1038.151293, so it would be slightly more, but I guess this would have to do with the decimal places that I used, or that they might use? Or Is that the whole idea with CAR that it's more accurate in that it calculates the interest earning interest as opposed to just multiplying a firgure by the interest rate.
Also, so you could receive the better offer of interest rate and receive it annually (But calculated monthly as that is what CAR does). Or you could pay the interest to a nominated account, which is good.
But would earning the higher rate and taking out a sum every month be better than taking out the interest every month? As after all you would be earning a higher rate, but I suppose you would be losing the potential growth of the sum that you are taking out? That would be some calculation....Anyone..Anyone...
hattrick_12a
Registered User
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Sorry, maybe a stupid question, but does that not mean then that your interest is not earning interest?
NR have two annual rates, one for interest credited annually, and one for interest credited monthly. Interest doesn't (normally) earn interest until it's credited. That's why for NR's annual interest account, the gross rate and the CAR are the same.
With their monthly interest account, a 12th of the gross interest is credited each month. So the interest earns interest for the remainder of the year -- that's why the CAR ends up being more than the gross rate for that account.
With their monthly interest account, a 12th of the gross interest is credited each month. So the interest earns interest for the remainder of the year -- that's why the CAR ends up being more than the gross rate for that account.