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Monthly interest savings accounts explained

Savings accounts are a great way to earn interest and financial peace of mind, but not all accounts are created equal, and it’s always worth comparing different types of savings accounts to find one that suits your needs. On this page, you’ll find out more about monthly interest accounts, how they work, what types of savings accounts pay monthly interest and how compounding can make a big difference to your savings.

Monthly interest savings accountsMonthly interest savings accountsMonthly interest savings accounts

What is a monthly interest savings account?

Monthly interest savings accounts are simply a type of savings account that pays interest monthly

You may have also heard of monthly income bonds, but although they sound similar to monthly interest savings accounts, they are different. Monthly income bonds are provided by National Savings & Investments (NS&I), which is backed by the Treasury. They pay interest monthly but don’t offer the benefit of compound interest.

 

What types of savings accounts pay monthly interest?

A number of different types of savings accounts have the option to pay interest monthly, although it’s important to check the details of each individual savings account to confirm this is the case before applying. The following savings accounts may pay monthly interest: 

  • Fixed rate bonds typically offer competitive interest rates if you have a lump sum to deposit that you won’t need to access for a set term, usually between six months and five years. Fixed rate bonds which offer monthly interest are amongst the best types of savings accounts to consider, because of their competitive interest rates and the effect of compound interest.
  • Fixed rate cash ISAs, or individual savings accounts, are similar to fixed rate bonds, but your savings are tax-free up to £20,000 per financial year (usually 6th April to 5th April). 
  • Easy access accounts are designed for flexibility and offer competitive variable rates of interest. They might be a good option for you if you want to earn interest every month and want the convenience of being able to top and withdraw from your savings whenever you want.
  • Notice accounts offer the flexibility of easy access accounts but usually feature more competitive interest rates.

Not all of these types of savings accounts will always pay interest monthly, so it’s always worth checking the account details.

How do monthly interest accounts work?

Monthly interest savings accounts pay interest monthly, either into a bank account you nominate or into your savings account through compounding (more on this below).

Why save into a monthly interest account?

Monthly interest accounts allow you to earn interest more frequently than savings accounts which pay interest annually, so you could earn more from your savings. This type of savings account might be right for you if you want faster results from your savings and don’t want to wait for an annual interest payment. Some monthly interest accounts also offer compounding interest.

What is compound interest, and how does it work?

Compound interest is the interest you earn from your original deposit combined with the interest you’ve earned so far. You might find that the best monthly interest accounts are also the ones which offer compound interest, as you’ll keep earning interest on each previous month’s interest. This could mean your savings grow quicker.

Is my money protected in a monthly interest savings account?

If you open a monthly interest savings account with a UK-regulated bank, the Financial Services Compensation Scheme (FSCS) protects your deposit, up to £85,000 per person, per banking group. The FSCS protects deposits in the event a financial institution is dissolved or fails. At Raisin UK, we want to protect your savings, so we only allow you to make deposits of up to £85,000 per person, per banking group.

Compare monthly interest savings accounts
at Raisin UK

If you want to quickly and easily compare and open monthly interest savings accounts, register for a Raisin UK Account and apply today. Opening an account with Raisin UK is free and you’ll find competitive interest rates from a range of UK banks.  

If you have any questions, our UK-based Customer Services Team is happy to help.

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