I have opened a Cash ISA recently and I don't seem to understand how they calculate the ISA earnings.
So as an example, suppose I have a cash ISA maxed out at £5,940 (I know this is going up in July to £15000).
So for that first month, I earn 2% = £118.8 (as an example, at a fictitious bank). For month 2, do I get paid interest on my initial sum (5940), or on the total balance of my ISA (6085.8).
So is the following, the correct way to calculate this?
initial balance: 5940
month 1 balance: 5940 + 2% = £6058.80
month 2 balance: 6058.8 + 2% = £6179.97