The amount of interest you receive depends not only on the interest rate but also on how often you receive it. That is because with interest paid half way through the year you get the chance to earn interest on the interest as well as on the amount already in the account. For example, some banks and building societies pay interest half-yearly. The National Savings Bank Investment Account pays yearly.
Before you invest, as well as checking the interest rate, also check how often it's paid. The table on the right shows you how much you would get at the end of a year at various interest rates with interest paid and reinvested in the same account for the rest of the year. You can see it becomes less important when interest rates are low. This rate of interest is called the compound annual rate which is sometimes abbreviated as CAR.
Warning: many banks and building societies pay a lower rate for monthly interest compared with annual. But some don't pay the equivalent of the compound annual rate - they pay less. So the society with the best rate for yearly interest may not be the best for monthly.
How much interest table
Quoted Interest at year end on £100 if paid
rate Yearly Half- Quarterly Monthy
yearly
% £ £ £ £
3 3.00 3.02 3.03 3.04
3.25 3.25 3.28 3.29 3.30
3.5 3.5 3.53 3.55 3.56
3.75 3.75 3.79 3.80 3.82
4 4.00 4.04 4.06 4.07
4.25 4.25 4.30 4.32 4.33
4.5 4.50 4.55 4.58 4.59
4.75 4.75 4.81 4.84 4.85
5 5.00 5.06 5.09 5.12
5.25 5.25 5.32 5.35 5.38
5.5 5.50 5.58 5.61 5.64
5.75 5.75 5.83 5.88 5.90
6 6.00 6.09 6.14 6.17
6.25 6.25 6.35 6.40 6.43
6.5 6.50 6.61 6.66 6.70
6.75 6.75 6.86 6.92 6.96
7 7.00 7.12 7.19 7.23
7.25 7.25 7.38 7.45 7.50
7.5 7.50 7.64 7.71 7.76
7.75 7.75 7.90 7.98 8.03
8 8.00 8.16 8.24 8.30
8.25 8.25 8.42 8.51 8.57
8.5 8.50 8.68 8.77 8.84
8.75 8.75 8.94 9.04 9.11
9 9.00 9.20 9.31 9.38
9.25 9.25 9.46 9.58 9.65
9.5 9.50 9.73 9.84 9.92
9.75 9.75 9.99 10.11 10.20
10 10.00 10.25 10.38 10.47
10.25 10.25 10.51 10.65 10.75
10.5 10.50 10.78 10.92 11.02
10.75 10.75 11.04 11.19 11.30
11 11.00 11.30 11.46 11.57
12 12.00 12.36 12.55 12.68
13 13.00 13.42 13.65 13.80
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Last checked 10 September 2001