First Direct 8%

[zebbedee]

The thread is about First Direct 8% for £300 a month I cannot equate your 13p to that.

So on July 2nd and July 3rd before tax isn't it £300 x 0.08 = £24 per year, so per day divide by 365 = 6.6p?

No, it's compound interest, the annual rate is 8% over a year R=1.08*D where R is the total returned and D is the deposited amount.

So to get the daily rate we take P=1.08 where P is the fraction return

R=300*(1.08)^(2/360) (360 days, I think banks work on 360 day years)

R=300*(1.00042765)

R=300.128 (round uo to 300.13 and take of the initial deposit to get 13p return on those 2 days)

[Democorruptcy]

No, it's compound interest, the annual rate is 8% over a year R=1.08*D where R is the total returned and D is the deposited amount.

So to get the daily rate we take P=1.08 where P is the fraction return

R=300*(1.08)^(2/360) (360 days, I think banks work on 360 day years)

R=300*(1.00042765)

R=300.128 (round uo to 300.13 and take of the initial deposit to get 13p return on those 2 days)

If you are doing (2/360) aren't you adding the 2 nights together? I meant per night.

[zebbedee]

If you are doing (2/360) aren't you adding the 2 nights together? I meant per night.

Sorry, yeh so per night its R=300*(1.08)^(1/360)=300.064141, so 6.4141p interest on the first night and R=300.064*(1.08)^(1/360)=300.12829 or 6.4149p interest. The second night returns more because it is interest on the principle AND interest on the interest. This is how it works on the deposit at month 2, it earns interest for less lime but the annualised rate is still the same, just as it is with any account. The mathematical rules are the same regardless of whether the bank allows unlimited deposits to the account or not.

I think I can understand that you wouldn't have an argument if you could dump £30k into one of these at opening and earn 8% over a year but the return of circa £124 on £300 deposited per month is not a result of some slight of hand by the bank but the rules of compounding on a sum deposited at monthly intervals. I'd so love to be able to drop a load of savings into an account earning 8% but as thats not possible I'll work with whats available and distribute amoungst these accounts to maximize the return and then drop the rest in a 3%er.

In the previous post I meant about HSBC because some of these accounts conditions are that money not deposited in a given month cannot then be deposited in a subsequent month and money withdrawn in a month loses all interest days for that month, just to cover my bases. I don't know the specific terms of the First Direct account.

[Democorruptcy]

The reason I asked for the interest on 2nd July was then to query why it would be less on 2nd August.

I think of it as 11/12 of 8% but looking at how you would break it down you would leave it as 8% and reduce the number of days accrued. Whichever way you look at it money invested in August returns less interest than money deposited in July

It's clear it's something we won't agree on. I see it as a marketing gimmick to trap people into thinking they get 8% on the full amount deposited over a year. I have shown articles that prove that happens. It is an annual account so I would prefer it to say the annual rate applied to the full amount invested i.e. around 4.33%.

[zebbedee]

The reason I asked for the interest on 2nd July was then to query why it would be less on 2nd August.

I think of it as 11/12 of 8% but looking at how you would break it down you would leave it as 8% and reduce the number of days accrued. Whichever way you look at it money invested in August returns less interest than money deposited in July

It's clear it's something we won't agree on. I see it as a marketing gimmick to trap people into thinking they get 8% on the full amount deposited over a year. I have shown articles that prove that happens. It is an annual account so I would prefer it to say the annual rate applied to the full amount invested i.e. around 4.33%.

It wouldn't be less on second August than it would on the second July, it would be the same rate, however I know where you are coming from, the nominal sum returned for money deposited on 2nd august would be less at the end of the year (but it hasn't been deposited for as long) but the rate would be 8% annual. With the way you see it then banks would have to state 'roll up, roll up, get your mortgage here only 75% on a 25 year mortgage or 58% on a 20 year mortgage or 27% on 10 or 0% on 0 year...' instead an annualised rate is stated. It is just the same for savings. Would you like to see a 5 year bond at 4% APR or 21.66%?

I' m quite confident that I could agree with you but then we'd both be wrong

Edited December 19, 2011 by zebbedee

[europbaron]

For the hard of thinking, you'd have to deposit over 5k in a normal 3% savings account and leave it for the whole year to achieve the same amount of interest.

I'm very happy having just received my first year's interest and have just opened another regular saver with them.

You don't need to put a lot of money into a current account either to be eligible for this account. Open a 1st account and one of their standard savings accounts. Leave 1 pound in the standard saver and then all you need to put into the current is the 300 that you save each month.

As stated earlier in the thread, their customer service is good for a phone based bank, so I am tempted to start using the 1st account as my regular current account.

[guitarman001]

Has anybody gone through with this then?

I'm just looking at it again but it seems such a hassle having to close your old accounts in order to get this. I guess maybe it's a good thing as you don't want loose ends.