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Interest calculations
Find out more about how we calculate interest on your savings account.
How is my interest calculated?
We use standard calculation to work out the amount of interest you earn:
- Cleared balance (or transaction amount)
- x interest rate (or rate change difference)
- x number of days to the next interest payment date
- ÷ number of days in the year
- (i.e. 365 or 366 in a leap year)
When you open your account, we project how much interest you will be paid at the next interest payment date, assuming the balance and the interest rate don't change.
| Transaction type: | Cash deposit |
|---|---|
| Amount: | £10,000.90 |
| Interest rate: | 5% |
| Date paid in: | 1 Jan 2009 |
| Interest payment date: | 31 May 2009 |
| Number of days to the next interest payment date: | 151 |
| £10,000.90 x 5% x 151 days ÷ 365 days = £206.87 gross | |
This is the gross amount of interest due. Unless you are registered to receive interest gross, we will deduct the tax at the rate required by HM Revenue and Customs, before interest is paid to you. This is the ‘net’ amount you receive. This rate of tax is currently 20% - so, using this example, the amount of interest you would receive on 31 May 2009 would be £165.50 (£206.87 - £41.37 tax). Please note, for the purpose of the illustration all subsequent examples are shown with interest paid gross. Some accounts, such as Cash ISAs, have interest paid tax-free. If this is the case the details will be provided in your Terms and Conditions.
What happens if I make additional transactions?
If you make further transactions, the amount of interest due will either increase or decrease depending upon whether you pay funds into the account or make withdrawals. For example:
| Transaction type: | Cheque withdrawal |
|---|---|
| Amount: | £1,000.32 |
| Interest rate: | 5% |
| Date paid in: | 1 Feb 2009 |
| Interest payment date: | 31 May 2009 |
| Number of days to the next interest payment date: | 120 |
| £1,000.32 x 5% x 120 days ÷ 365 days = £16.44 gross | |
Because this is a withdrawal, this amount will be deducted from the amount you are due to be paid. The new amount of interest you are due to receive on 31 May 2009 in the example, is £190.43 gross (£206.87 - £16.44).
When do I earn interest on a deposit?
If you pay cash into your account, your account will earn interest from the day of receipt. Deposits via CHAPS (Clearing House Automated Payment System), BACS (Bankers Automated Clearing Services) and FPS (Faster Payments Service) will also earn interest from the business day of receipt.
You will earn interest from the day of the payment if you transfer funds from another Northern Rock plc account or if a Northern Rock plc cheque is paid in.
Payments made by cheque have to go through the cheque clearance cycle.This enables banks to check your instructions, make sure there are sufficient funds available and transfer payments. If you pay a cheque into your Northern Rock plc account, the money will be available for withdrawal on the fourth business day after we process the cheque (a business day excludes Saturdays, Sundays and Bank Holidays). However, you will start earning interest two business days after deposit (for all cheques which are not Northern Rock plc cheques). Please note you can only be certain the money is yours by the end of the sixth business day after we process the cheque, from which point the money cannot be taken from you without your agreement unless you are a knowing party to fraud.
What about when I make withdrawals?
If you withdraw funds from your account by cash, cheque, FPS or CHAPS we will pay you interest up to and including the day prior to the date of withdrawal. In the case of transfers between Northern Rock plc accounts, we will pay interest up to and including the day prior to the date of the transfer on the account from which the funds are withdrawn.
You will find details in our Interest Calculation leaflet. Please download the file, and print it out.
Note: This file is in Adobe Acrobat PDF format. If you do not have a copy download Acrobat Reader from the Adobe site.- * Call our UK-based Contact Centre between 8am to 8pm business days, 8am to 4pm Saturday and 10am to 3pm Sunday. Calls are charged at your service provider’s prevailing rate and may be monitored and recorded.