The facts behind current account interest rates

What you need to know about current accounts, interest rates and the difference between APR and AER

11:17 21 November 2013

It's no secret that some people out there do not know the difference between AER and APR as it applies to interest rates; if you are one of such people, then this article is for you.

The Difference

Annual Percentage Rate (APR) is the annual interest rate payable on acquisition of loans, mortgages are those charges acquirable from the use of credit cards; whereas Annual Equivalent Rate (AER) is the rate of interest you will earn in for the amount held in saving accounts. Higher AERs provides more interest for you on your credit and works in the same way as overdrafts, just that it’s the opposite.

Is it possible for the interest rate of a current account to change suddenly?

Interest rates on current accounts can be changed by the provider, as well as the Bank of England; but the provider is obliged to notify you on time before the new interest rates take effect.

How to identify good interest rates on current accounts

• Do not forget to check out the interest rates for both credit and overdrafts as high rates on credit and low rates on overdraft is the best combination

 

• Check out interest rates on emergency or unauthorised borrowing as some companies place high rates on them.

 

• Watch out for companies that have different rates with respect to your credit. Some offer reduced interest rates on your credit once you go above a certain level.

Is it ideal to compare current account interest rates?

Yes it is! Your overdraft can be reduced if you can carefully search for an account with lower interest rates charged on borrowing. It’s also possible you get the best company around in order to get the best benefits on your account.

 

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