What is EAR and is it different from APR?
EAR stands for equivalent annual rate and, like APR, it’s an interest rate that’s used when you borrow money.
More specifically, EAR is the interest you would be charged over a year if your account were to remain overdrawn. However, EAR does not include any fees and charges, like APR does. Therefore, if you go into unarranged overdraft, your bank might charge you additionally.
As with APR, the EAR you’re offered might depend on your personal circumstances. At Starling, we use a risk-based pricing that allows us to offer rates at 15%, 25% or 35%, depending on the customer’s credit score.
How do you work out EAR?
The way EAR is calculated is slightly different from APR. EAR takes into account compound interest (interest on interest), along with the interest rate. How often it’s charged also plays a part of how it’s calculated. Many banks have calculators that will help you figure out how much an overdraft will cost you.
Read our blog post on compound interest.
Then, what does AER mean?
AER stands for Annual Equivalent Rate. As opposed to APR and EAR, AER is used for savings. In fact, most banks will pay you to keep your money with them. The AER illustrates what the interest rate would be if interest was paid and compounded once each year.
What is Starling’s interest rate?
Starling pays 3.25% AER / 3.19% Gross (variable) interest on personal account and joint account balances up to £5,000.
This table shows how much interest you could earn with a Starling current account.
|Interest earned after one month
(based on 31 days)
|Interest earned after 12 months
These estimates assume that you pay the money into your account on the first day of the month. They also assume that you don’t make any withdrawals or additional deposits, and that the interest rate doesn’t change. Interest is calculated daily and paid monthly. These estimates are only examples and don’t take into account individual circumstances.
We pay gross interest, which means we don’t take off any tax you might owe.
Prefer not to earn interest? We can move your account to 0% AER instead.
With our Fixed Saver you can lock away savings for a year and earn 4.48% AER (fixed) interest on balances from £2,000 up to £1,000,000.
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What are Direct Debits and standing orders
Understanding bank statements