First Direct 5% Savings Loophole: Need Advice

rosshind

Last week I opened an ing savings account (4.75% APR). Then two days later they informed me that they would be changing their rate to 4.5%.. The rate was borderline already so I am thinking about First directs saver (5.00% APR). The probelm with that is that I will make withdrawals every few months and for the First Direct account, they dont give you any interest in months where you moake one.

PROPOSED SOLUTION.

I have a Cahoot current account and could open their savings account too. If I do, on any month in which I intend to make a withdrawal, on the 2nd of that month, I will transfer my whole First Direct balnce to my Cahoot current account, and then instantly (there will be no clearing time) to my cahoot savings account. I will transfer it back to First direct on around the 30th of the month.


I will loose 6 to 8 days interest due to the clearing time back and forth between first direct and Cahoot, better than the full 30 days.. Because of that, in the month i make withdrawals the APR equivilent will be around 3.7%, instead of the 0% First direct would propose I deserve!

QUESTION:

Is there a problem opening several savings accounts in a short space of time? Like there would be with credit cards?

ffacoffipawb

rosshind wrote:

QUESTION:

Is there a problem opening several savings accounts in a short space of time? Like there would be with credit cards?

Nadolig Llawen.

No, I see no problem with doing this whatsoever.

(Except maybe remembering all the accounts that you may have. I have about twenty, most of which are in my firstdirect internet banking plus account aggregator anyway.!)

rosshind

I got 99% of the way through the Cahoot savings account set-up process, then it said they wanted to do a credit search. I didn't think they needed one, since I do not want credit from them. Problem is, I recently have had 4 credic searches done, 2 by vodafone, one by MINT and one by Debenhams. I will want a mortgage in about 6 or 7 months and I dont want my credit score / rating / report to be ruined... Any chance of that?

Ross.

innovate

Don't know what credit search rules Cahoot use on savings accounts - I have two with them (alongside a current account), one involved a search, the other didn't.

If you think of moving money between your Cahoot and DD savers, then you could leave everything in Cahoot @ 5.25% for 6 months for starters. When the Cahoot bonus rate ceases, you can still make a decision where to put your money then.

grumbler

Don't forget to get £25 for opening Cahoot accont through Quidco ...

Milarky

The problem with what is being proposed it that it shouldn't be considered a solution. The OP is asking [in my view] "how do I keep the 5% on First direct e saver for as much of the time as possible?" Well you don't accomplish that by moving the whole balance out and back for at least six days at a time gaining no interest at all. What is wrong with ING at 4.5%? [That's 90 percent of the FD rate, equivalent to having your money in there for 27 days a month, which knocks the 6 days into a hat]

I've asked this before - but not of First Direct themselves, but if the rules allow a husband and wife to each have either:

One Joint bank a/c OR two single accounts operated in tandem PLUS:

both open an e saver in sole names and link these to the corresponding bank a/c, THEN:

you ought to be able to continue to receive the 5% on the whole e saver balance PROVIDED you only need to make one withdrawal per month AND can time this to occur on the 1st each time.

here's how it works

e Saver 'A' with the family fortune in - say £50,000, sole current a/c 'A' with £100 in

e Saver 'B' £1 nominal balance in - sole current a/c 'B' with £100 in

When you want to make a withdrawal - say £3,000 set up these transfers:

£49,999 from e Saver 'A' to current a/c 'A'

£46,999 from current a/c 'A' to current a/c 'B'

£46,699 from current a/c 'B' to e Saver 'B'

Whenever you want to make another witdrawal, simply move all but £1 to the linked current a/c, move whatever is not intended for use to the spouse's current a/c and from there into their e Saver.

In theory a joint a/c is best provided that FD allow joint bank a/cs and sole names e Savers - which I've a feeling they don't. What they can't stop under the rules, however, is individuals passing cash between their current accounts and that is all that is needed for this to work.

rosshind

Thanks all, but I think this has gone off on a tangent. I'm not married and don't want a joint account with anyone (great solution for some others tho).

I think your maths is a bit out when you ask what's the matter wiht the ing account. Whether this is a better option or not than my solution (meaning I loose 6 days), is entirely dependant on the number of months in which I make a withdrawal. In my solution the approx equivilent gross rate for the month I do that will be 3.6%. But then, I would be getting the 5% APR with first direct all of the other months. In total, a much better solution than keeping it in ing at 4.5% APR I don't want to bore people with too much detail here. Thanks for your proposed solution.

I'll ask another, more specific question in a different thread about the problem credit checks.

Caped_Avenger

Milarky wrote:

I've asked this before - but not of First Direct themselves, but if the rules allow a husband and wife to each have either:

One Joint bank a/c OR two single accounts operated in tandem PLUS:

both open an e saver in sole names and link these to the corresponding bank a/c, THEN:

you ought to be able to continue to receive the 5% on the whole e saver balance PROVIDED you only need to make one withdrawal per month AND can time this to occur on the 1st each time.

...

In theory a joint a/c is best provided that FD allow joint bank a/cs and sole names e Savers - which I've a feeling they don't. What they can't stop under the rules, however, is individuals passing cash between their current accounts and that is all that is needed for this to work.

A joint bank account is possible. So, provided you're both accepted for one, you're there. The eSavings account can only be opened in sole names, so if you get one each, you can play the system like that fairly easily.