Why is the 'effective annual rate' higher than the stated rate?

Because they measure two different things. The stated rate is an annual rate split across the payout dates. The effective annual rate says what the year's return would be if each period's return stayed in the account and itself earned the same rate. Banks in Egypt are required to publish the effective annual rate on deposits, so seeing both figures side by side is normal and does not signal any fee.

Example at a hypothetical 20% a year per 100 pounds: with monthly payout you receive about 1.67 pounds a month, 20 pounds a year. If each month's return is added to the amount and earns the same rate, the year ends at about 21.94 pounds. If it is added every 3 months, about 21.55.

So the gap between the two figures is the effect of compounding. If the product pays the return out to you, the money you receive is usually computed from the stated rate and the gap is not extra money; the worked example in the key-facts statement shows which. If the product adds the return to the amount, the effective rate describes what happens.

• Check the key-facts statement: is the return paid out or added, and how often? And ask the bank for a worked example at your amount.