Best Monthly Interest Savings Accounts

Yes, in some cases it is possible to change the interest frequency on your savings account. However, you’ll need to check with your provider to see if your account includes this feature.

Monthly interest accounts may be right for you if you plan to use your earnings to supplement your income, or if you just simply want to see the benefits of saving without waiting for a yearly interest payment.

However, keep in mind that if you withdraw interest each month, you’ll miss out on the effects of compounding, which could see you earn less than if you left returns in the account.

Compound interest is when you earn interest on the interest you’ve already earned. For example, if interest is paid back into your savings account each month, you will earn interest on this as well as on your original deposit.

Traditional savings accounts, including those offering interest monthly, don’t typically charge any fees as standard.

However, some providers may charge a fee for extra features or apply a penalty for accessing funds before the end of a fixed term or notice period.

Furthermore, some savings accounts are only available if you have a linked current account with a provider, which itself may charge a monthly fee.

Most savings accounts require a minimum deposit to open before you can start receiving returns, but this isn’t tied to interest.

This being said, some accounts can pay different rates depending on the value of your pot and can sometimes require a minimum balance to maintain its headline rate.

To estimate the amount you could earn in interest each month, divide the annual gross rate by 12. You can then multiply this amount by your balance to see the monthly interest. If you don’t want to do the maths yourself, there are several online calculators that can help you to see how much interest you could receive on your savings. Bear in mind that any deposits, withdrawals, rate changes and the effect of compounding will affect the interest you earn.

For the 2024/25 tax-year, basic-rate taxpayers can earn up to £1,000 in interest each year before paying income tax thanks to the Personal Savings Allowance (PSA). Meanwhile, for higher-rate and additional-rate taxpayers this limit falls to £500 and £0 respectively. Our guide explains more about how your savings are taxed.

Receiving interest monthly could make it easier to track your annual interest earnings to ensure you don’t breach your PSA, however, those with larger deposits may wish to consider a monthly paying ISA instead.

Assuming you leave some money in the account, you will continue to earn interest on the remaining balance.

If interest is calculated daily, for example, your interest would be re-calculated the day after you withdraw the funds and factored into your monthly returns.

However, bear in mind that removing interest each month will limit the effects of compounding, meaning you’ll earn less over time than if you kept any interest invested.

With monthly paying accounts, you can typically decide to have interest paid to an account of your choosing or added to your existing balance to keep growing your savings through compounding interest.

If you choose the first option, your interest should be automatically deposited into the nominated account each month, but it’s worth checking with your provider.

Yes, some monthly interest savings accounts can be opened as a joint account, making it easier to save towards a shared savings goal.

Our chart above can help you find the best rates available on the market. You can filter results by rate order to see which accounts are currently offering the top returns.

If the AER is the same across the monthly and annual paying accounts, then there is no difference in the amount of interest you will earn. This is because AER takes into account the effect of monthly compounding interest.

This being said, if you wish to use your interest earnings to supplement your income, or simply want to see more immediate returns on your investment, then you may find monthly paying accounts more suitable.

Yes, there’s no limit on the amount of savings accounts you can hold at once, including those that pay interest monthly.

In fact, depending on your situation, having more than one account could make it easier to track different savings goals.

Alongside choosing an account with a competitive rate, keeping any interest invested is one of the best ways to get the most interest from your savings account.

As previously mentioned, with compounding, interest is paid on any previous earnings as well as the original deposit. Therefore, keeping interest in the account each month will accelerate the growth of your savings.

No matter how large your deposit is, your returns ultimately depend on the interest rate offered by the account. It’s therefore important to shop around for the highest paying monthly savings accounts to ensure you get the best possible returns on your investment.

For example, paying £50,000 into an account offering 3.00% AER would see you earn £125 after one month. However, depositing the same amount into an account paying a higher 5.00% AER would boost your returns to £208.50 in the same period.

The maximum amount you can deposit into a monthly interest savings account varies depending on the provider.

You can find out more about an account’s maximum investment by selecting ‘view further details’ on each listing on our chart.

Your money is as safe in a monthly interest account as in any other savings account. Under the Financial Services Compensation Scheme (FSCS), up to £85,000 that you have saved with each provider (or multiple providers that share a banking licence) is protected.

You’ll need to register for a self-assessment tax return if your income from savings or investments is over £10,000.

If you’re at risk of exceeding your limit, you may find it easier to track your interest earnings with more frequent payouts compared to having interest paid annually, however, it’s worth seeking professional advice.