# Monthly Saver how to work out comparative APR



## Taxboy (Aug 23, 2006)

I note that Nationwide are offering a monthly saver rate of 6% with a max of £250 per month invested. Can anyone please advise how to calculate what APR I would need to achieve to beat this by holding £3000 on deposit.

Hopefully I have explained what I am trying to do but essentially I need to understand what interest rate I would need on £3000 invested now as opposed to drip feeding the £250 each month to beat the offer

TIA


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## Bero (Mar 9, 2008)

You get 6% APR - fact and 6.0001+% is the rate you would need on deposit to beat this - fact. 

But I think I know what you mean. As it will take you 12 months to get the £3000 into the account you will earn the equivalent of 3% on the £3000 on the 1st year (just in the monthly saver account) as the account only averages £1500 over the 12 months.

Your view of what deposit account APR you need to better this is a common fallacy. As you drip feed the money into your account the £2750, £2500 £2250 etc will STILL be making interest in your deposit account.

So over the 12 months you will get the equivalent of 3% on £3000 in your monthly saver account but you need to add the interest you will make from the money sitting in your deposit account before it's drip fed in, which will be the equivalent of 1/2 of it's quoted APR.

Total interest = (Monthly saver APR)/2 + (deposit APR)/2 x 3000

As long as 6% is greater than you're getting on your deposit account you will be better off with the a monthly saver.


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## SteveyG (Apr 1, 2007)

The equivalent APR actually works out at 2.72%  The effective monthly interest rate is 0.4867%.


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