Why are there two different rates for my NatWest e-Isa?

By TONY HAZELL FOR THE DAILY MAIL

Updated: 06:38 EST, 26 September 2012

I took out an e-Isa with NatWest this year, as I had more than £30,000 to invest.

I was expecting the 3.5 per cent rate advertised but NatWest now inform me I’m getting 3.47 per cent.

Have I missed something?
D.C-C., via email.

Confused: Why are there two different rates for my NatWest e-Isa?

Tony Hazell, from Money Mail, replies: Oddly, both are correct.

The rate you will actually get over a year is 3.47 per cent.

This is called the ‘gross’ rate and is slightly lower because NatWest pays interest monthly, rather than annually.

The 3.5 per cent rate is what’s called an ‘annual equivalent rate’, or AER. This is the hypothetical rate you would get if NatWest paid out annually.

Banks have to display this so savers have a common basis on which they can compare any savings account.