Savings adverts sometimes highlight a monthly interest figure that looks impressive. AER — Annual Equivalent Rate — is designed to help you compare the yearly return more fairly when interest is left in the account.
Use AER to shortlist products. Do not choose on AER alone.
Watch for rates that fall after a few months
Some accounts pay a high rate for a short time, then drop. A product showing 5.00% AER for three months and 2.00% afterwards is not the same as 5.00% for a full year.
On £10,000, work out roughly what you would earn across the whole year, then compare that with a steady rate. It takes a few minutes and saves a lot of disappointment.
Compare like with like
In the UK, compare ISA rates with other ISA rates before comparing them with taxable accounts. In Canada, tax-sheltered accounts can change what you keep after tax. A higher headline rate is not always better once tax is considered.
A simple comparison order
Same type of access. Similar term. AER to make a shortlist. Then check bonus end dates, early-exit rules, deposit protection, and what happens at maturity. After that, choose. If two options are nearly the same, pick the simpler one.