What’s the difference between the AER and the gross rate?
The Annual Equivalent Rate (AER) is a rate used by UK banks to help customers compare savings accounts. The AER illustrates what your interest rate (the gross interest rate) would be if interest was only paid and compounded once each year.
For example: if interest is paid once a year then the gross interest rate and the AER would be the same, as interest is only applied once. But if interest is paid monthly – as with our Online Savings Account – then the AER may be higher than the gross interest rate.
This is because the AER will take into account the compounding interest that you earn every month over the course of a year.
The key thing to remember when comparing different savings accounts is to compare like with like – so either AER with AER, or gross with gross.
How do bonus rates work?
Some savings accounts offer a bonus rate on top of the underlying interest rate. This is an additional percentage of interest paid for a set period of time.
When the bonus rate ends, the overall interest rate you earn on that account drops down – which is when it’s a good time to check the best buy tables to see if you could be getting a better deal elsewhere.
Which savings account might be right for you?
Having a range of different accounts, with different purposes, can help you make the most of your money. There are several different types of savings accounts, including:
Easy access accounts
Like our Online Savings Account, these give you the flexibility to withdraw money without having to give any notice. The interest rate tends to be variable, which means it can change from time to time.
Regular savings accounts
If you like to add cash to your savings on a regular basis, these accounts require you to make a deposit every month. Interest rates can be fixed or variable.
Fixed rate savings accounts
These give you the security of locking in an interest rate for a set length of time, so you’ll know exactly how much interest you’ll earn over that period, but usually access to your money is restricted. So they may not be a good choice if you need to dip into your savings regularly.
More about our 1 Year Fixed Rate Saver
The main difference between cash ISAs and other savings accounts is that you don’t pay UK tax on the interest you earn on the savings you hold in an ISA. While there’s a limit to how much you can put in each tax year, they can be a good way to grow a tax-free savings pot.
Read more about cash ISAs
About our savings accounts
Available to UK residents over the age of 18, you can open all our savings accounts with as little as £1 and save up to £250,000* in total (excluding interest).
More about our accounts