Calculation Amount
The interest for your Cash ISA is calculated on a daily basis in the background, based on the money you have at the end of each day. However, the interest amount is credited to your Cash ISA once a month, specifically on the final business day of the next month. For example, the interest you earn for November would be paid into your account on 31 December.
This monthly addition occurs because, in most cases, the daily amounts are too small to be individually added to your pocket. This is the formula we use every day in our system to calculate the interest for Cash ISA in Plum:
Illustrative example (not based on your individual circumstances):
Consider a Cash ISA account with a 4.68% AER (variable) including the Bonus Rate of 0.88% AER and an initial balance of £10,000.
After a year, the balance would be £10,478.17. Interest accrued after 12 months is £389.81 and the bonus accrued after 12 months is £88.36, making the total interest accrued £478.17.
This assumes you make the full deposit when opening the account and do not make any further deposits or withdrawals in the following 12 months.
Compounding Frequency
Our Cash ISA compounds interest monthly. This means interest is calculated and added to your balance once a month rather than every day.
Example: In June, the first working day was June 3rd, so the balance for June 1st and June 2nd remained unchanged. This working day rule affects how the interest accumulates over the month.
Interest compounds monthly, based on the accrued balance, not just the credited amount. For example, while the interest you earn in month 1 will be credited at the end of the following month, the interest in month 1 is already taken into account when calculating the total balance that earns interest.
So, even though the crediting occurs later, the interest still compounds monthly, ensuring your total balance grows consistently at the stated AER rate.
Calculation Period
The calculation period for the Cash ISA is from the first day of each month until the last day of the same month. However, keep in mind that the interest that has occurred, will be credited to your Cash ISA account on the final business day of the next month..
Please note that if you withdraw your money before the interest is credited to your account, the interest will be lost. We recommend making withdrawals only after the interest rate has been credited to your Cash ISA.
The bonus interest amount will be calculated daily and paid annually to your account. Bonus interest earned will be paid to your account along with the interest earned for your 12th month and at that point, will be available for withdrawal.