Smart (Card)

[DCP11C]

Hi. I have been a smart card saver for 5 years now. Now I am over the age limit they will apparantly automatically switch the account to a CashBuilder card account. Looking at their interest rates at 0.1% - am I reading this correct?

Currently the smart card pays interest on June and December. I worked out that in June '08 I got about 2.6% interest and in December '08 I got 2.3% interest - does this mean that the annual interest (AER?) is 2.3+2.6=4.9%?

Thanks.

[atypical]

You are reading it right, Nationwide's "competitive savings rate" is 0.10% for the CashBuilder card.

To get the gross you add the interest rates together and then divide by two i.e. find the average: 2.45%. Finding the AER is more tricky as you have to take the compounding effect into consideration; the interest earned on your interest.

But for your purposes I'm sure the gross will suffice, the AER would be a smidgen higher.

edit: the AER is 2.458% if my maths is correct.

[rb10]

When I had this account, it was six months after my 18th birthday that it would have been switched over to Cashbuilder, so I closed it a few days before that.

Definitely well worth closing it and looking for a new account. Despite the fact that the leaflet Nationwide sent out when I was around 18 described the Cashbuilder account as being similar to the Smart account (omitting to mention there that it had around one-zillionth the rate of interest, a fairly major difference imo!). I personally think they are very sneaky in this transfer - many young people don't have a clue when it comes to money, so will just ignore the letter, leaving their money in such a low rate account.

[withnell]

I worked out that in June '08 I got about 2.6% interest and in December '08 I got 2.3% interest - does this mean that the annual interest (AER?) is 2.3+2.6=4.9%?

Thanks.

It's likely that the account rate would have changed during the year period, and if your balance was static throughout the period, the gross rate from Jan-June was (2.6 x 2)= 5.2%, and from July-Dec was (2.3 x 2) = 4.6%. This works out as 4.96% AER.

FYI the current AER on the smart account is 2.25% http://www.nationwide.co.uk/savings/under_18s/under-18s.htm

[DCP11C]

Thanks guys!

I have a FlexAccount with them also. Would it be possible to transfer my savings to another bank account? Would they allow me to do this?

So sorry, just really only started to become more practical with money matters!!

rb10 - deffo agreed with you there, nationwide cheeky s.o.b.s.! Basically in all other banks basic interest rates are over 0.1% I mean that's stupid!!

atypical - thanks for the calculations!!!

withnell - the way I worked it out was by:
interest/pre-interest savings * 100 (I think I have to check)

[agsnu]

Actually basic interest rates are pretty crap in most banks (Nationwide isn't a bank).

If you want to stick it out at Nationwide, there's nothing stopping you opening an e-Savings account and transferring it all there (you can, in fact, do it all from online banking). You would, however, lose the ability to withdraw cash directly from a hole in the wall - you'd have to manually log on and transfer it to your FlexAccount first.

And yes, you are free to deposit your money with however you want to... Since Cashbuilder is instant access, there are no restrictions on you withdrawing funds...

[martinman3]

Although Nationwide don't allow you to have a child account, Yorkshire BS do and their rates are higher .:)

The YBS Freedom account can be opened by anyone under the age of 21 and it has a Link card.
http://www.ybs.co.uk/savings/childrens/freedom/index.html

[DCP11C]

Thanks for the link.

(Looking at google now) but is there really anything worthy of notice (it seems that BS give more interest than banks) that is different between a bank and a building society?

I would also like to ask whether or not investing in bonds is a good idea?

Also e-savings accounts scare me if for ex I lost internet access at any point in time.

Thank you.

[rb10]

Also e-savings accounts scare me if for ex I lost internet access at any point in time.

Some banks have internet terminals in branch, so if you lose internet access at home you can just go into a branch and transfer money there.

Also, if you ring up the online banking department, they can often transfer money for you over the phone. Although it's usually technically not allowed, many will do it as a one-off.