Banking

How Does Interest on Bank Accounts Work?

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The interest you earn on the money you keep in your bank account is also known as savings interest.

When you open a bank account, the bank will let you know how much interest you will earn on your money. Make sure you remember this!

There are a few things that have an impact on the amount of interest you will make on your money.

These are:

  • If the money is taxable
  • How much you pay in
  • How often interest is paid to you

Your bank will tell you the amount of interest they will pay you by using either the Gross Interest Rate or the Net Interest Rate.

Now, AER otherwise known as the Annual Equivalent Rate is the actual interest rate you will pay before tax. It will be lower after tax if you don’t use an ISA savings account.

What Are The Best Tax-Free ISA Accounts?

Aldermore 2 Year Fixed Rate Cash ISA
Term
2 Years
Open With
£1000
Interest Rate
1.8% Fixed
Protection Scheme
FSCS
Tesco Instant Access Cash ISA
Term
1 Years
Open With
£1
Interest Rate
1.45% Fixed
Protection Scheme
FSCS
Principality Building Society 5 Year Fixed Rate ISA
Term
5 Years
Open With
£500
Interest Rate
1.7% Fixed
Protection Scheme
FSCS
Ford Money Cash ISA
Term
1 Years
Open With
£1
Interest Rate
1.45% Variable
Protection Scheme
FSCS
Moneybox Lifetime ISA
Term
1 Years
Open With
£1
Interest Rate
1.4% Variable
Protection Scheme
FSCS

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