Monthly interest savings accounts explained

Reading time 5 minutes

At a glance:

A monthly interest savings account pays interest every month, instead of once a year.

Monthly interest can help you stay motivated as your savings pot grows more often.

How does a monthly interest savings account work?

A monthly interest savings account pays interest on your balance at regular monthly intervals instead of once a year.

Interest on a monthly savings account is worked out each day. So, you might get a different amount depending on how many days are in the month. A longer month means a slightly higher payment.

How much monthly interest will I earn?

How much interest you earn each month depends on how much you’ve got saved, and what your interest rate is. The bigger the amount saved and the higher the interest rate, the more interest you’ll earn.

Can I withdraw monthly interest?

Whether you can withdraw monthly savings interest will depend on the account you have opened. The main types of savings account are easy access and fixed rate.

Easy access accounts – you can usually take money out whenever you want. Interest rates can go up or down.

Fixed rate savings accounts – interest rate stays the same. Usually can’t take money out (we don’t currently offer monthly interest on our fixed products).

What are the benefits of a savings account that pays monthly interest?

Regular motivation: Watching your savings pot grow every month can be a great way to stay motivated. These smaller, regular gains may help you resist withdrawing money and help your savings thrive.

You can withdraw interest if you want to: Once some interest has built up, you could withdraw if you wanted to, instead of waiting a year to do so.

Simple to track: a monthly interest account makes it easy to see how well your savings are doing, without waiting for an annual interest payment. At YBS, you can use our website or app to track the progress of your savings.

Monthly vs annual interest: How do you decide?

Whether you pick monthly or annual interest, the amount you earn will stay the same if the AER on the accounts you are comparing are the same.

If two accounts pay the same interest rate and have the same terms, the amount of interest you earn on your balance will be the same, regardless of which you pick.

The main thing to think about is whether you’d prefer regular interest payments that you could potentially dip into, or you’re happy to wait for the whole payment later.