Monthly interest savings accounts

A monthly interest savings account is a type of account that pays interest on its balance into a nominated bank account on a set day each month. This day is set by the provider and will likely be the day that the account was created.

The interest rate can either be variable (meaning it could go up or down) or fixed rate (where it will remain unchanged for an agreed term).

As the names suggest, a key difference between monthly and annual interest is how often it’s paid. Monthly interest is paid on the same day every month, whereas annual interest pays all the interest you’ve earnt over a year in one lump sum.

Some providers can only make payments Monday – Friday and so the day you receive your interest may differ.

The interest rates between monthly and annual interest accounts will also differ. The AER changes because annual interest accounts benefit from compounded interest (the interest you earn on the interest you’ve already earned). With an account that pays monthly, interest is paid directly into your nominated bank account each month and is essentially withdrawn from your savings account. In contrast, an annual interest account will still earn interest each month but this interest will stay within the savings account. So, you’ll earn interest on the interest itself the following month. Over a year that results in a higher amount of interest overall as your balance (the amount you’ll earn interest on) increases each month.

All of Shawbrook’s savings accounts are protected by the Financial Services Compensation Scheme (FSCS). The FSCS will protect funds across all of your Shawbrook accounts up to a maximum value of £85,000 for sole account holders or £170,000 for joint accounts.

Any amount you hold above these limits (including across multiple accounts) is unlikely to be eligible for FSCS protection, although there are some exceptions for temporary high balances. For further information, visit www.fscs.org.uk.

There is no difference between protection for monthly or annual accounts. As Shawbrook’s savings accounts are cash savings accounts (as opposed to stocks and shares investments), your capital is not at risk.