Monthly Income Accounts
For some savers, waiting for interest payments until the end of the quarter or end of the year is too long. Instead some savers opt to receive their interest payments monthly, traditionally these have been individuals who have high amounts in their long term savings. These savers then bolster their income by the monthly interest returns on their considerable savings.
These monthly income accounts used to be a novelty, however in recent times many ‘normal’ saving accounts have started to offer the same monthly interest rates. As a result the number of dedicated monthly income accounts has decreased.
Those which are still in existence often demand a high minimum contribution to start the account. A few accounts charge for withdrawals above a certain limit, say £500. If £500 is removed from the account the saver is deducted a set amount of interest returns.
Some accounts offer bonus introductory rates, while these rates are appealing initially they often revert back to a relatively low interest rate, leaving you worse off in the long term.
These accounts are also taxable, unlike ISAs or Junior ISAs, another factor to consider when calculating your likely dividend from the interest rates.
Returns from these kind of accounts have also diminished recently, as monthly income accounts go out of vogue. There is no indication that this trend will reverse any time soon.
As the market place develops monthly income accounts are less and less attractive. The yields are increasingly diminishing compared to pension plans or investment returns. Many banks offer rates which are below that of inflation, meaning that ultimately the accounts are losing value.
In this context less and less individuals are choosing dedicated monthly income accounts, however there is still a market for those individuals wishing to secure a reliable ‘top up’ stream of funds to supplement earnings.