Another savings question

Legacy_user

I have nearly £2000 sitting in my ING account. I have just over £2000 sitting in my Halifax Websaver from when my regular saver matured in November. I have just opened a A & L account so i can gain the 5% interest rate on the current account and also fund the higher rate regular savings account. I cant afford to pay £500 into my account as well as paying my Halifax regular savings accounts so that £500 will have to come from savings from my other two accounts (Until the funds dry up that is).

Now i am wondering, shall i chuck the whole lot into the Alliance and Leicester now, and gain the 5% instead of being paid 4.5% on my ING account and 4.65% on the Websaver? Or shall i start paying out from my lowest paying account first to fund the A & L? I understand if i dont pay £500 into the A & L account i will have to pay a charge but does anyone know if it will be worth it?

Dagobert

To answer the question whether it's worth it moving the money to a higher interest account, you need to know a few parameters:

• how many days does the transfer take?
• do the sending and receiving bank pay interest on the day of withdrawal and/or receipt?

This determines how many days of interest you lose through the transfer.

Halifax websaver -> A&L current account: the BACS transfer takes 2 days, A&L pay interest from the next working day. I don't know whether Halifax pay interest on the day of withdrawal - presumably not. That means a minimum of 3 days lost.

If the money arrives in the A&L c/a on a Friday though, you will also lose Saturday + Sunday!

A 3 day loss of interest when moving from 4.65% to 5% will take 40 days to recoup. From then on the money will earn more. If you leave th £2000 in the A&L a/c for a year, you will have gained about £6.25 (compared to leaving the money where it is).

A 3 day loss of interest when moving from 4.5% to 5% will take 27 days to recoup. If you leave th £2000 in the A&L a/c for a year, you will have gained about £9.25.


If you leave the money in the websaver and use it to drip-feed the Halifax regular saver, no interest is lost because the transfer is internal. Using the £2000 to feed the regular saver with 12 £166 monthly instalments will gain you £25.36 (compared to leaving the money where it is).


The next question would be what you are keeping the A&L a/c for. For the travel insurance?
To keep the account going by transferring £500 every month costs money (the lost interest). If that's your reasoning for the travel insurance, well, it does not come for free.

You could simply rotate the same £500 to keep the a/c going. But as explained above, transfer in costs a minimum of 3 days and transfer back to websaver costs a minimum of 3 days, too. A&L hold on to the money for an extra day before putting it through BACS.

That means £500 in and £500 out loses 6 days, times 12 costs at least £4.58 in lost interest as opposed to leaving it in the websaver.




All interest figures are before tax.

System

Wow, what a detailed response, thankyou!

A few more pointers, i cant use the websaver to fund the regular savings accounts because as far as i know, it has to come from outside funds. I didnt have the A & L account because of the travel insurance. (I aint really sure if my account has the built in insurance anyway), but i doubt if i would use it if i did.

Dagobert

Judi wrote:

A few more pointers, i cant use the websaver to fund the regular savings accounts because as far as i know, it has to come from outside funds.

No - it can definitely be funded from the websaver. That's what was set up for me last year. The online interface allows you to set up the SO yourself. What you can't do is manual internal transfers (payments).

If feeding from an external account, you can either set up an SO or arrange the BACS payments manually.