Simple vs Compound Interest for bank account - Example please?

[scatalyst]

In the "Bank Savings Interest Rates" thread, the following comment was made, "I also wonder how many people understand the difference between simple and compound interest."

I guess I don't. Could someone explain it to me?

I mean I understand that compound interest is better than simple interest, but I don't really get how much of a difference it could make. Could someone explain and demonstrate the differences? Using a real life example of bank account interest rates would be helpful.

[Ling Kae]

Lets use $100,000 in the example. Bank 1 pays 2.5% compound interest. Bank 2 pays 2.8% simple interest. Both are for 12 Month terms.

---

Bank 1 will come to $102,528.85 (compounding Monthly)

Bank 2 will come to $102,800.00 (simple interest)

So to demonstrate, even though the 2.5% is compounding Monthly the 2.8% is still the better rate. If both banks were paying the same interest rate then Bank 1 would win.

Compounding Monthly means interest is paid to your account Monthly. Then on the second Month not only the capital but the interest you earned in the first Month also earns interest. Therefore it compounds Monthly and the interest received is higher but not if another back offers a higher rate. (as demonstrated above).

Now look what happens when both banks pay 2.5%

Bank 1 will pay you back $102,528.85

and

Bank 2 will pay you back $102,500.00

Bank 1 wins in this instance.

So back to the other thread, the other guy was getting 2.5% compounding interest and I am getting 2.8% with simple interest. I would win and that is why I chose a Bankok Bank 2.8% term deposit.

I hope this helps you.

I used this website to make my calculations. http://www.moneychimp.com/calculator/compound_interest_calculator.htm

[scatalyst]

Very helpful answer, LK. Thank you so much. And thanks for including the website for calculating compound interest, too. I've bookmarked it and will try using it in the future.

[chiang mai]

"!So back to the other thread, the other guy was getting 2.5% compounding interest and I am getting 2.8% with simple interest. I would win and that is why I chose a Bankok Bank 2.8% term deposit".

Except:

Your 2.8% represents the total amount of interest payable at the end of the period.

My 2.5% figure is the rate of interest I'm earning on interest that was paid up front at the rate of 2.8% (or is paid monthly and reinvested each month), 2.5% is therefore the interest on the interest which is why I would never go for a simple interest formula.

OP: try this calculator to play around with and see the difference in values, it handles simple and compound interest on a daily weekly, monthly basis..

http://www.pine-grove.com/online-calculators/compound-interest-calculator.htm

Edited August 24, 2014 by chiang mai

[Pib]

Here's another calculator focused towards "fixed: savings accounts that come in various lengths and compounding methods. Very easy to use...you can select a time period of years, months or even days....7 different compounding methods.,,etc, Fixed Deposit Calculator

[Ling Kae]

"!So back to the other thread, the other guy was getting 2.5% compounding interest and I am getting 2.8% with simple interest. I would win and that is why I chose a Bankok Bank 2.8% term deposit".

Except:

Your 2.8% represents the total amount of interest payable at the end of the period.

My 2.5% figure is the rate of interest I'm earning on interest that was paid up front at the rate of 2.8% (or is paid monthly and reinvested each month), 2.5% is therefore the interest on the interest which is why I would never go for a simple interest formula.

OP: try this calculator to play around with and see the difference in values, it handles simple and compound interest on a daily weekly, monthly basis..

http://www.pine-grove.com/online-calculators/compound-interest-calculator.htm

chang mai, I am happy to be proven wrong if I am wrong but you need to remember that it is the end result that matters, not whether it is compounding or not. What do you end up with in your hand at the end of the excercise is what is important.

Even if your interest was paid up front you can not beat 2.8% over the 12 Month period (simple interest). You can not get interest twice. The scenario was a $100,000 in the example. Bank 1 pays 2.5% Monthly compound interest. Bank 2 pays 2.8% simple interest. Both are for 12 Month terms. (both banks are on equal term lengths at different rates, one compounding Monthly and one just paying simple interest at the end of the term.)

Using your calculator:

Bank 1 will pay you up front $102,528.85 Now that is $2,528.85 up front. Your interest is paid, nothing more to come.

Bank 2 will pay at the end $102,800.00 Now that is $2,800 interest at the end, your interest is paid, nothing more to come.

Your calculator works the same as mine, both give the same answers.

The only way to compare both products is to use exactly the same term length of deposit, in this case 1 year or 365 days. To all readers, do not get hung up on whether it is compounding monthly or not. It is the end result that counts, in this case the 2.8% wins clearly.

[chiang mai]

chang mai, I am happy to be proven wrong if I am wrong but you need to remember that it is the end result that matters, not whether it is compounding or not. What do you end up with in your hand at the end of the excercise is what is important.

Even if your interest was paid up front you can not beat 2.8% over the 12 Month period (simple interest). You can not get interest twice. The scenario was a $100,000 in the example. Bank 1 pays 2.5% Monthly compound interest. Bank 2 pays 2.8% simple interest. Both are for 12 Month terms. (both banks are on equal term lengths at different rates, one compounding Monthly and one just paying simple interest at the end of the term.)

Using your calculator:

Bank 1 will pay you up front $102,528.85 Now that is $2,528.85 up front. Your interest is paid, nothing more to come.

Bank 2 will pay at the end $102,800.00 Now that is $2,800 interest at the end, your interest is paid, nothing more to come.

Your calculator works the same as mine, both give the same answers.

The only way to compare both products is to use exactly the same term length of deposit, in this case 1 year or 365 days. To all readers, do not get hung up on whether it is compounding monthly or not. It is the end result that counts, in this case the 2.8% wins clearly.

Do you agree that the interest on a simple interest deposit is the same amount, regardless of whether it is paid at the start or at the end of the deposit period?

[Ling Kae]

Simple answer is yes. Whether it is paid up front or at the end it will be the same.

[chiang mai]

Simple answer is yes. Whether it is paid up front or at the end it will be the same.

Good! So if I get all the interest in my possession at the start of a one year deposit, for example, that means I have one year in which to invest that interest and earn additional interest, I might for example put that money into a savings account that pays a 2.5% compounded interest rate of return.

Do you agree that approach would produce a greater return than the person who invested into an account that paid simple interest at maturity? A rhetorical question because you already told us it must, by virtue of your previous answer.

Make sense?

[Ling Kae]

Simple answer is yes. Whether it is paid up front or at the end it will be the same.

Good! So if I get all the interest in my possession at the start of a one year deposit, for example, that means I have one year in which to invest that interest and earn additional interest, I might for example put that money into a savings account that pays a 2.5% compounded interest rate of return.

Do you agree that approach would produce a greater return than the person who invested into an account that paid simple interest at maturity? A rhetorical question because you already told us it must, by virtue of your previous answer.

Make sense?

chang mai, I love to work out these figures. Can you tell me, will your bank give you the interest in cash in your hand to spend freely at the begining of your term deposit? Can you walk out of the bank and spend that cash on day one of opening that account?

[chiang mai]

Simple answer is yes. Whether it is paid up front or at the end it will be the same.

Good! So if I get all the interest in my possession at the start of a one year deposit, for example, that means I have one year in which to invest that interest and earn additional interest, I might for example put that money into a savings account that pays a 2.5% compounded interest rate of return.

Do you agree that approach would produce a greater return than the person who invested into an account that paid simple interest at maturity? A rhetorical question because you already told us it must, by virtue of your previous answer.

Make sense?

chang mai, I love to work out these figures. Can you tell me, will your bank give you the interest in cash in your hand to spend freely at the begining of your term deposit? Can you walk out of the bank and spend that cash on day one of opening that account?

Yes, I just opened such an account with one of my banks, CIMB. I did a 2.8% fix for eight months, all the interest is paid up front but the principle is locked until the maturity date, it's the banks way of securing funds for a specific period. I then withdrew the interest they had paid and put it into UOB preferred savings at 2.5%, compound interest of course. FWIW and just so you know I'm not B'Sing, I did write about that scenario in the interest rate thread a short time ago.

But the subject and scenario that we've been discussing works almost as well where the interest is paid away into a savings account, monthly,, common practice in my world.

EDIT: I've got to run, will pick up any questions/issues in the AM.

cheers

Edited August 24, 2014 by chiang mai

[Ling Kae]

Simple answer is yes. Whether it is paid up front or at the end it will be the same.

Good! So if I get all the interest in my possession at the start of a one year deposit, for example, that means I have one year in which to invest that interest and earn additional interest, I might for example put that money into a savings account that pays a 2.5% compounded interest rate of return.

Do you agree that approach would produce a greater return than the person who invested into an account that paid simple interest at maturity? A rhetorical question because you already told us it must, by virtue of your previous answer.

Make sense?

chang mai, I love to work out these figures. Can you tell me, will your bank give you the interest in cash in your hand to spend freely at the begining of your term deposit? Can you walk out of the bank and spend that cash on day one of opening that account?

Yes, I just opened such an account with one of my banks, CIMB. I did a 2.8% fix for eight months, all the interest is paid up front but the principle is locked until the maturity date, it's the banks way of securing funds for a specific period. I then withdrew the interest they had paid and put it into UOB preferred savings at 2.5%, compound interest of course. FWIW and just so you know I'm not B'Sing, I did write about that scenario in the interest rate thread a short time ago.

But the subject and scenario that we've been discussing works almost as well where the interest is paid away into a savings account, monthly,, common practice in my world.

EDIT: I've got to run, will pick up any questions/issues in the AM.

cheers

OK, terrific, that is a good product but we are not done yet. So you do get that interest up front, now look what happens.

You now have a further $2,528.85 up front which you will invest elsewhere at 2.5%. Here's what happens with that.

It will produce a further $63.22 so now you will have a total of $2,528.85 + $63.22 = $2,592.07 it is still well short of the $2,800 you would get with the higher interest on the simple interest rate.

Where you may be getting stuck is the interest rates itself. A 2.5% Monthly compounding interest rate can not beat a 2.8% yearly simple interest rate on a 12 Month term deposit.

I albsoloutly agree with you that >if< the interest rates from the 2 different banks were the same then the Monthly compounding rate would win. But it can not win if other banks are offering higher rates, the higher percentage rates wipe out any of the benefits of Monthly compounding interest.

[chiang mai]

Good! So if I get all the interest in my possession at the start of a one year deposit, for example, that means I have one year in which to invest that interest and earn additional interest, I might for example put that money into a savings account that pays a 2.5% compounded interest rate of return.

Do you agree that approach would produce a greater return than the person who invested into an account that paid simple interest at maturity? A rhetorical question because you already told us it must, by virtue of your previous answer.

Make sense?

chang mai, I love to work out these figures. Can you tell me, will your bank give you the interest in cash in your hand to spend freely at the begining of your term deposit? Can you walk out of the bank and spend that cash on day one of opening that account?

Yes, I just opened such an account with one of my banks, CIMB. I did a 2.8% fix for eight months, all the interest is paid up front but the principle is locked until the maturity date, it's the banks way of securing funds for a specific period. I then withdrew the interest they had paid and put it into UOB preferred savings at 2.5%, compound interest of course. FWIW and just so you know I'm not B'Sing, I did write about that scenario in the interest rate thread a short time ago.

But the subject and scenario that we've been discussing works almost as well where the interest is paid away into a savings account, monthly,, common practice in my world.

EDIT: I've got to run, will pick up any questions/issues in the AM.

cheers

OK, terrific, that is a good product but we are not done yet. So you do get that interest up front, now look what happens.

You now have a further $2,528.85 up front which you will invest elsewhere at 2.5%. Here's what happens with that.

It will produce a further $63.22 so now you will have a total of $2,528.85 + $63.22 = $2,592.07 it is still well short of the $2,800 you would get with the higher interest on the simple interest rate.

Where you may be getting stuck is the interest rates itself. A 2.5% Monthly compounding interest rate can not beat a 2.8% yearly simple interest rate on a 12 Month term deposit.

I albsoloutly agree with you that >if< the interest rates from the 2 different banks were the same then the Monthly compounding rate would win. But it can not win if other banks are offering higher rates, the higher percentage rates wipe out any of the benefits of Monthly compounding interest.

That's nonsense, are you suggesting that a 2.8% simple interest fixed deposit from CIMB pays a different amount than the same product from Bangkok Bank!!! You already agreed in an earlier post that the interest amount was the same regardless of whether it was paid at the outset or at maturity, I'm reinvesting that interest you are not. Exactly where you get your $2,528.85 from escapes me!

This is all about the ability to use and reinvest the interest received, simply (no play on words intended), you can't do that with a product that pays at maturity, I can where the interest is received up front or monthly. Now enough of this!

[howzat]

OMG... My head hurts with all this rocket science at 6.30 a.m.

[Ling Kae]

Yes, I just opened such an account with one of my banks, CIMB. I did a 2.8% fix for eight months, all the interest is paid up front but the principle is locked until the maturity date, it's the banks way of securing funds for a specific period. I then withdrew the interest they had paid and put it into UOB preferred savings at 2.5%, compound interest of course. FWIW and just so you know I'm not B'Sing, I did write about that scenario in the interest rate thread a short time ago.

But the subject and scenario that we've been discussing works almost as well where the interest is paid away into a savings account, monthly,, common practice in my world.

EDIT: I've got to run, will pick up any questions/issues in the AM.

cheers

OK, terrific, that is a good product but we are not done yet. So you do get that interest up front, now look what happens.

You now have a further $2,528.85 up front which you will invest elsewhere at 2.5%. Here's what happens with that.

It will produce a further $63.22 so now you will have a total of $2,528.85 + $63.22 = $2,592.07 it is still well short of the $2,800 you would get with the higher interest on the simple interest rate.

Where you may be getting stuck is the interest rates itself. A 2.5% Monthly compounding interest rate can not beat a 2.8% yearly simple interest rate on a 12 Month term deposit.

I albsoloutly agree with you that >if< the interest rates from the 2 different banks were the same then the Monthly compounding rate would win. But it can not win if other banks are offering higher rates, the higher percentage rates wipe out any of the benefits of Monthly compounding interest.

That's nonsense, are you suggesting that a 2.8% simple interest fixed deposit from CIMB pays a different amount than the same product from Bangkok Bank!!! You already agreed in an earlier post that the interest amount was the same regardless of whether it was paid at the outset or at maturity, I'm reinvesting that interest you are not. Exactly where you get your $2,528.85 from escapes me!

This is all about the ability to use and reinvest the interest received, simply (no play on words intended), you can't do that with a product that pays at maturity, I can where the interest is received up front or monthly. Now enough of this!

There is no play of words. I have never mentioned anything about 2.8% simple interest from CIMB, YOU DID. Read and re read the scenarios again.

There is NO WAY a 2.5% compounding Monthly rate will out perform a 2.8% simple interest term deposit for the same period.

And I did mention that if both banks were offering the same rate then the Monthly compounding one be the better product.

You mentioned that now you have a UOB term deposit compounding Monthly at 2.5%. The Bangkok Bank term deposit is 2.8% and pays simple interest at maturity. The Bangkok Bank Term Deposit for the same period of time will pay you more net interest than the 2.5%. Even though the lower one is compounding it is not enough to compensate for the higher interest rate being offered by Bangkok Bank. It is the end result of cash in your hand that counts, not the method it uses to get there. Please use the calculator (link you supplied) and run the figures using a 12 Month period. The 2.8% interest one wins. You have not proven otherwise.

Edited August 25, 2014 by Ling Kae

[chiang mai]

OK, terrific, that is a good product but we are not done yet. So you do get that interest up front, now look what happens.

You now have a further $2,528.85 up front which you will invest elsewhere at 2.5%. Here's what happens with that.

It will produce a further $63.22 so now you will have a total of $2,528.85 + $63.22 = $2,592.07 it is still well short of the $2,800 you would get with the higher interest on the simple interest rate.

Where you may be getting stuck is the interest rates itself. A 2.5% Monthly compounding interest rate can not beat a 2.8% yearly simple interest rate on a 12 Month term deposit.

I albsoloutly agree with you that >if< the interest rates from the 2 different banks were the same then the Monthly compounding rate would win. But it can not win if other banks are offering higher rates, the higher percentage rates wipe out any of the benefits of Monthly compounding interest.

That's nonsense, are you suggesting that a 2.8% simple interest fixed deposit from CIMB pays a different amount than the same product from Bangkok Bank!!! You already agreed in an earlier post that the interest amount was the same regardless of whether it was paid at the outset or at maturity, I'm reinvesting that interest you are not. Exactly where you get your $2,528.85 from escapes me!

This is all about the ability to use and reinvest the interest received, simply (no play on words intended), you can't do that with a product that pays at maturity, I can where the interest is received up front or monthly. Now enough of this!

There is no play of words. I have never mentioned anything about 2.8% simple interest from CIMB, YOU DID. Read and re read the scenarios again.

There is NO WAY a 2.5% compounding Monthly rate will out perform a 2.8% simple interest term deposit for the same period.

And I did mention that if both banks were offering the same rate then the Monthly compounding one be the better product.

You mentioned that now you have a UOB term deposit compounding Monthly at 2.5%. The Bangkok Bank term deposit is 2.8% and pays simple interest at maturity. The Bangkok Bank Term Deposit for the same period of time will pay you more net interest than the 2.5%. Even though the lower one is compounding it is not enough to compensate for the higher interest rate being offered by Bangkok Bank. It is the end result of cash in your hand that counts, not the method it uses to get there. Please use the calculator (link you supplied) and run the figures using a 12 Month period. The 2.8% interest one wins. You have not proven otherwise.

I'm going to guess that English is not your first language so I'll be gentle with you and explain it one last time, pay attention and stay alert!

YOU - take out a 12 month fixed rate deposit paying simple interest at the rate of 2.8%, you invest 10,000, on day 365 you collect your interest and principle which totals 10,280.

ME - I take out a 12 month fixed rate deposit paying simple interest at the rate of 2.8%, I invest 10,000, on day 1, the day I first invest, the bank pays me all my interest up front, they hand me 280.

I then take that earned interest (280) and I invest it in a separate account that pays 2.50% and compounds the interest daily. On day 365 I receive my principle from the first bank (the bank that paid me 2.8% on day 1) plus the compounded interest from the second bank (the one that paid me 2.5% compounded), the total cash I now have equals 10,287.09 because I earned 7.09 from the second bank.

Scale up or down according to amount invested.

Is that clear to you?

[Ling Kae]

OK, terrific, that is a good product but we are not done yet. So you do get that interest up front, now look what happens.

You now have a further $2,528.85 up front which you will invest elsewhere at 2.5%. Here's what happens with that.

It will produce a further $63.22 so now you will have a total of $2,528.85 + $63.22 = $2,592.07 it is still well short of the $2,800 you would get with the higher interest on the simple interest rate.

Where you may be getting stuck is the interest rates itself. A 2.5% Monthly compounding interest rate can not beat a 2.8% yearly simple interest rate on a 12 Month term deposit.

I albsoloutly agree with you that >if< the interest rates from the 2 different banks were the same then the Monthly compounding rate would win. But it can not win if other banks are offering higher rates, the higher percentage rates wipe out any of the benefits of Monthly compounding interest.

That's nonsense, are you suggesting that a 2.8% simple interest fixed deposit from CIMB pays a different amount than the same product from Bangkok Bank!!! You already agreed in an earlier post that the interest amount was the same regardless of whether it was paid at the outset or at maturity, I'm reinvesting that interest you are not. Exactly where you get your $2,528.85 from escapes me!

This is all about the ability to use and reinvest the interest received, simply (no play on words intended), you can't do that with a product that pays at maturity, I can where the interest is received up front or monthly. Now enough of this!

There is no play of words. I have never mentioned anything about 2.8% simple interest from CIMB, YOU DID. Read and re read the scenarios again.

There is NO WAY a 2.5% compounding Monthly rate will out perform a 2.8% simple interest term deposit for the same period.

And I did mention that if both banks were offering the same rate then the Monthly compounding one be the better product.

You mentioned that now you have a UOB term deposit compounding Monthly at 2.5%. The Bangkok Bank term deposit is 2.8% and pays simple interest at maturity. The Bangkok Bank Term Deposit for the same period of time will pay you more net interest than the 2.5%. Even though the lower one is compounding it is not enough to compensate for the higher interest rate being offered by Bangkok Bank. It is the end result of cash in your hand that counts, not the method it uses to get there. Please use the calculator (link you supplied) and run the figures using a 12 Month period. The 2.8% interest one wins. You have not proven otherwise.

I'm going to guess that English is not your first language so I'll be gentle with you and explain it one last time, pay attention and stay alert!

YOU - take out a 12 month fixed rate deposit paying simple interest at the rate of 2.8%, you invest 10,000, on day 365 you collect your interest and principle which totals 10,280.

ME - I take out a 12 month fixed rate deposit paying simple interest at the rate of 2.8%, I invest 10,000, on day 1, the day I first invest, the bank pays me all my interest up front, they hand me 280.

I then take that earned interest (280) and I invest it in a separate account that pays 2.50% and compounds the interest daily. On day 365 I receive my principle from the first bank (the bank that paid me 2.8% on day 1) plus the compounded interest from the second bank (the one that paid me 2.5% compounded), the total cash I now have equals 10,287.09 because I earned 7.09 from the second bank.

Scale up or down according to amount invested.

Is that clear to you?

Yes absoloutly but when I gave the OP 2 scenarios none of those included your new revised summary above. You have re arranged the deck so to speak. We can move away from that, start fresh just for you, simple question for you is what I have been trying to prove all along.

Completely block out any thoughts and start fresh.

What term deposit would you take?

1. UOB paying 2.5% Compounding Monthly for a 12 Month term

or

2. Bangkok Bank paying 2.8% for a 12 Month term using the simple interest method.

This is not a trick question, this is simple Math.

Your answer please.

[chiang mai]

The source of this thread is here: http://www.thaivisa.com/forum/topic/560837-bank-savings-interest-rates/page-54#entry8288537

I'll repeat what I wrote in post 4 above one last time, the design of the investment model I was referring to at the outset was crystal.

"My 2.5% figure is the rate of interest I'm earning on interest that was paid up front at the rate of 2.8% (or is paid monthly and reinvested each month), 2.5% is therefore the interest on the interest which is why I would never go for a simple interest formula".

I give up on you, go read the thread again, I'm done here, bye!

[Ling Kae]

The source of this thread is here: http://www.thaivisa.com/forum/topic/560837-bank-savings-interest-rates/page-54#entry8288537

I'll repeat what I wrote in post 4 above one last time, the design of the investment model I was referring to at the outset was crystal.

"My 2.5% figure is the rate of interest I'm earning on interest that was paid up front at the rate of 2.8% (or is paid monthly and reinvested each month), 2.5% is therefore the interest on the interest which is why I would never go for a simple interest formula".

I give up on you, go read the thread again, I'm done here, bye!

So you refuse to answer my simple question in post 17. Never mind I'll take option 2 for obvious reasons.

At some point simple interest will out perform a compounding Monthly interest rate if it is offering a higher rate. You know the answer to my simple question you just won't admit it.

To all readers, it is the end result of a term deposit that counts (read cash in the hand at the end), not method of how it gets there.

[worgeordie]

Maybe the OP just wanted a simple answer,compound rates are where

you get interest on the interest over a term, simple rates you get interest

at end of term on the capital amount.

regards worgeordie

[sustento]

http://beginnersinvest.about.com/od/investingglossary/a/simple-interest-vs-compound-interest.htm

[chiang mai]

Maybe the OP just wanted a simple answer,compound rates are where

you get interest on the interest over a term, simple rates you get interest

at end of term on the capital amount.

regards worgeordie

There's also a middle ground, which is the point I was trying to make here, where simple interest accounts can be manipulated to some degree to create a partial compounded interest result, either by taking all the interest up front or monthly and reinvesting it. The ideal and optimal scenario however is an account that compounds and reinvests interest daily, such as the BAY or UOB savings accounts and since there is no tax deducted from them (up to 20k baht interest when the account can be closed and a new one opened) they are actually more effective accounts than longer term fixed rate simple interest accounts. Where accounts such as those fall short is there is no rate certainty, if BOT lowers the base rate the banks will reduce the interest rate on those accounts.

[khunken]

Maybe the OP just wanted a simple answer,compound rates are where

you get interest on the interest over a term, simple rates you get interest

at end of term on the capital amount.

regards worgeordie

There's also a middle ground, which is the point I was trying to make here, where simple interest accounts can be manipulated to some degree to create a partial compounded interest result, either by taking all the interest up front or monthly and reinvesting it. The ideal and optimal scenario however is an account that compounds and reinvests interest daily, such as the BAY or UOB savings accounts and since there is no tax deducted from them (up to 20k baht interest when the account can be closed and a new one opened) they are actually more effective accounts than longer term fixed rate simple interest accounts. Where accounts such as those fall short is there is no rate certainty, if BOT lowers the base rate the banks will reduce the interest rate on those accounts.

Maybe. It all boils down to doing your homework. Your last sentence is wrong however. A FTD taken out for whatever period is not affected by BOT interest rate changes. Only at renewal would the rate change.

[chiang mai]

Maybe the OP just wanted a simple answer,compound rates are where

you get interest on the interest over a term, simple rates you get interest

at end of term on the capital amount.

regards worgeordie

There's also a middle ground, which is the point I was trying to make here, where simple interest accounts can be manipulated to some degree to create a partial compounded interest result, either by taking all the interest up front or monthly and reinvesting it. The ideal and optimal scenario however is an account that compounds and reinvests interest daily, such as the BAY or UOB savings accounts and since there is no tax deducted from them (up to 20k baht interest when the account can be closed and a new one opened) they are actually more effective accounts than longer term fixed rate simple interest accounts. Where accounts such as those fall short is there is no rate certainty, if BOT lowers the base rate the banks will reduce the interest rate on those accounts.

Maybe. It all boils down to doing your homework. Your last sentence is wrong however. A FTD taken out for whatever period is not affected by BOT interest rate changes. Only at renewal would the rate change.

If you read it again slowly and carefully, you'll see that my reference was to BOT rate changes having an impact on on savings accounts, not on fixed rate deposit accounts!

[khunken]

Maybe the OP just wanted a simple answer,compound rates are where

you get interest on the interest over a term, simple rates you get interest

at end of term on the capital amount.

regards worgeordie

There's also a middle ground, which is the point I was trying to make here, where simple interest accounts can be manipulated to some degree to create a partial compounded interest result, either by taking all the interest up front or monthly and reinvesting it. The ideal and optimal scenario however is an account that compounds and reinvests interest daily, such as the BAY or UOB savings accounts and since there is no tax deducted from them (up to 20k baht interest when the account can be closed and a new one opened) they are actually more effective accounts than longer term fixed rate simple interest accounts. Where accounts such as those fall short is there is no rate certainty, if BOT lowers the base rate the banks will reduce the interest rate on those accounts.

Maybe. It all boils down to doing your homework. Your last sentence is wrong however. A FTD taken out for whatever period is not affected by BOT interest rate changes. Only at renewal would the rate change.

If you read it again slowly and carefully, you'll see that my reference was to BOT rate changes having an impact on on savings accounts, not on fixed rate deposit accounts!

I did and 'those' is ambiguous. But ok, you've clarified it.

[KittenKong]

I rather like my TMB Quick Interest account where I currently have my retirement extension deposit money at 3%.

https://www.tmbbank.com/personal/deposits/timeDeposits/quick-interest-en.php

At equal rates this account is unbeatable. Of course the rates may not be equal.

[chiang mai]

There's also a middle ground, which is the point I was trying to make here, where simple interest accounts can be manipulated to some degree to create a partial compounded interest result, either by taking all the interest up front or monthly and reinvesting it. The ideal and optimal scenario however is an account that compounds and reinvests interest daily, such as the BAY or UOB savings accounts and since there is no tax deducted from them (up to 20k baht interest when the account can be closed and a new one opened) they are actually more effective accounts than longer term fixed rate simple interest accounts. Where accounts such as those fall short is there is no rate certainty, if BOT lowers the base rate the banks will reduce the interest rate on those accounts.

Maybe. It all boils down to doing your homework. Your last sentence is wrong however. A FTD taken out for whatever period is not affected by BOT interest rate changes. Only at renewal would the rate change.

If you read it again slowly and carefully, you'll see that my reference was to BOT rate changes having an impact on on savings accounts, not on fixed rate deposit accounts!

I did and 'those' is ambiguous. But ok, you've clarified it.

Yes you're right, sloppy English on my part, apologies to all.

[Pib]

I rather like my TMB Quick Interest account where I currently have my retirement extension deposit money at 3%.

https://www.tmbbank.com/personal/deposits/timeDeposits/quick-interest-en.php

At equal rates this account is unbeatable. Of course the rates may not be equal.

From going to that TMB webpage it looks like the Quick Interest Rates are now only 1.25% for a 3 month Quick Interest Deposit and 2.0% for a 12 month Quick Interest Deposit. Am I reading that page right?

[chiang mai]

Please don't confuse this thread with the bank interest rate thread, I think this one has all but concluded it's mission, would be a shame to have two threads running in parallel on the same subject.

[Pib]

I rather like my TMB Quick Interest account where I currently have my retirement extension deposit money at 3%.

https://www.tmbbank.com/personal/deposits/timeDeposits/quick-interest-en.php

At equal rates this account is unbeatable. Of course the rates may not be equal.

From going to that TMB webpage it looks like the Quick Interest Rates are now only 1.25% for a 3 month Quick Interest Deposit and 2.0% for a 12 month Quick Interest Deposit. Am I reading that page right?

If I'm reading the TMB page right as to the current Quick interest rate, I expect when you made your last deposit it was paying 3% at the time for a 12 month deposit but it's down to 2% now. Kinda like around 11 months ago when I did a 15 month fixed deposit (matures this Dec) for 3.25% with Bangkok Bank.

Over the last year rates have come down a fair amount with Bank of Thailand lowering it rates which the banks generally follow in-tow.