So confused, in need of a banking overhaul

mouthscradle

I've got various bank accounts and until today after reading Martin's guides and having a look at my statements I had no idea just how pathetic the interest rates were on them, so I'm planning to sort them out and hopefully earn myself a little bit more money per year in the process.

I'm a mature student (27) and my only income is my student loan, maintenance grant, and a low income bursary from the university (total income around £6000 a year).

The accounts I currently have money in are:

Barclays Bank Account is the current account I use day to day, and have my loan paid into three times a year. The amount in there varies between £1000 to £3000. Interest rate is an amazing 0% AER. I have an £800 overdraft limit but I'm never overdrawn.

I also have a Natwest Student Account with £1350 in. The interest rate is 0.10% AER and I have an overdraft limit of £1250 interest free.

I also have savings of £1000 which is currently in my mums ISA where she also has some of her money, it's a Barclays Variable Rate ISA and according to the statement, the interest rate on this is 3.51% gross.

I have two other accounts with no money in, one a Nationwide Flexaccount which I opened last year to make use of the free debit card withdrawals abroad, interest rate 0%, and the other is a Cahoot Savings Account which I opened 3 or 4 years ago intending to save in but never bothered, I *think* the interest rate on this account is currently 2% AER.

Basically, I'm really confused on where to put my money. I definitely need a new current account and was thinking of applying for the A&L Premier Current Account to get the £100 bonus, which I think would outweigh any interest I'd make in a year. Although I'm not sure whether I'd pass the credit check, not being employed. I'd probably keep an average of £1000 in here at any time.

But when it comes to savings I have no idea what I would be best off doing. The account balance would probably range from £2500 to £4500 depending on time of year. I'd like to maximise the interest, obviously. I could probably afford to put around £1500 away for 6 months or a year and not touch it if that would pay more.

I have no credit or store cards and no debts other than student loan.

As I don't pay tax, I have no idea whether I would be better off putting my money into an ISA or a Savings Account, the interest rates on both seem pretty poo at the moment from reading the guides on this site. And it confuses me more when I see the A&L account that pays 6.5% interest, which seems higher than ISA's and savings accounts at the moment, does that mean I should put all my money in one of those and use it for current account AND savings

Also, as I have an interest free overdraft with Natwest which I don't need to use to live off, would it be worth me taking out that money and putting it into a savings account?

Appreciate any advice whatsoever, I'm a complete interest-calculating noob , it boggles my brain. I would ideally like to get this sorted and close down any accounts I'm no longer using. Does having a lot of accounts open affect your credit rating at all, even if they're in credit/unused? My partner and I are hoping to save for a house deposit over the next two years, so that's something I want to make sure I don't adversely affect. Many thanks indeed

anselld

mouthscradle wrote: »

I'm a mature student (27) and my only income is my student loan, maintenance grant, and a low income bursary from the university (total income around £6000 a year).

So presumably a non-taxpayer then. (student load doesn't count as income, it is borrowing)

mouthscradle wrote: »

The accounts I currently have money in are:
Barclays Bank Account is the current account I use day to day, and have my loan paid into three times a year. The amount in there varies between £1000 to £3000. Interest rate is an amazing 0% AER. I have an £800 overdraft limit but I'm never overdrawn.

Don't be afraid to be overdrawn at 0% AER so long as you are in control and never go beyond the agreed limit. (See Martin's bits on "good debt")

mouthscradle wrote: »

I also have a Natwest Student Account with £1350 in. The interest rate is 0.10% AER and I have an overdraft limit of £1250 interest free.

Keep it, borrow £1200 interest free and put it in savings.

mouthscradle wrote: »

I also have savings of £1000 which is currently in my mums ISA where she also has some of her money, it's a Barclays Variable Rate ISA and according to the statement, the interest rate on this is 3.51% gross.

Why? The tax man would frown on this as far as your Mum is concerned. If you want to shelter money long term from tax you would be better getting your own ISA. If you just want good interest rate get a savings account and submit an R85 form for payment of gross interest. (assuming you are non tax payer)

mouthscradle wrote: »

I have two other accounts with no money in, one a Nationwide Flexaccount which I opened last year to make use of the free debit card withdrawals abroad, interest rate 0%, and the other is a Cahoot Savings Account which I opened 3 or 4 years ago intending to save in but never bothered, I *think* the interest rate on this account is currently 2% AER.

Keep if you want to use them or ditch.

mouthscradle wrote: »

Basically, I'm really confused on where to put my money. I definitely need a new current account and was thinking of applying for the A&L Premier Current Account to get the £100 bonus, which I think would outweigh any interest I'd make in a year. Although I'm not sure whether I'd pass the credit check, not being employed. I'd probably keep an average of £1000 in here at any time.

Why new current account? Your Barclays presumably does what you need apart from paying interest and is 0% APR. Keep little (or negative) money in there and hold savings elsewhere.

mouthscradle wrote: »

But when it comes to savings I have no idea what I would be best off doing. The account balance would probably range from £2500 to £4500 depending on time of year. I'd like to maximise the interest, obviously. I could probably afford to put around £1500 away for 6 months or a year and not touch it if that would pay more.

Take your pick from moneysupermarket.com. Perhaps ING Direct. 5% for a year, quick to open and accepts Faster Payments from your Bank so no interest lost in transit.

mouthscradle wrote: »

I have no credit or store cards and no debts other than student loan.

If you can be disciplined and pay off each month why not get Egg Money? 1% cash back on everything you spend and 4% interest on positive cash balance. You can effectively treat it as a reasonable interest paying account with debit card if you don't like the thought of credit.

mouthscradle wrote: »

As I don't pay tax, I have no idea whether I would be better off putting my money into an ISA or a Savings Account

Answers the question above!! You will no doubt pay tax one day. The only advantage of using an ISA now (if you can afford not to touch the money) is that you start building up your tax free "pot" at up to £3600 per year.

mouthscradle wrote: »

Appreciate any advice whatsoever, I'm a complete interest-calculating noob , it boggles my brain. I would ideally like to get this sorted and close down any accounts I'm no longer using. Does having a lot of accounts open affect your credit rating at all, even if they're in credit/unused?

If you don't like the "mess" of lots of accounts just keep your current account and a good savings account. (And an ISA if you feel the need)
Savings accounts are not listed on your credit file. Overdrafts might be though when I checked mine it wasnt. Any credit agreements are, but that is not a *bad* thing provided you don't miss any payements or exceed your authorised limit. In fact I suspect lenders like to see some *good* payment history.

Good luck. The fact that you have got to this site suggest you might come to enjoy the challenge rather than having your brain boggled.

mouthscradle

Thank you very much for the reply, I really appreciate it.

anselld wrote: »

So presumably a non-taxpayer then. (student load doesn't count as income, it is borrowing)

That's right, I don't pay tax on my interest.

anselld wrote: »

Don't be afraid to be overdrawn at 0% AER so long as you are in control and never go beyond the agreed limit. (See Martin's bits on "good debt")

I'm not sure if my Barclays overdraft is 0% EAR, it doesn't say on my statement. I was referring to the interest on my balance when in credit being 0% AER. I'm really careful with my money and manage quite comfortably on my income, but even on the rare occasion I've needed to, I am always reluctant to go overdrawn, I just don't like knowing I am I will find out from Barclays whether my overdraft on this account is interest free.

anselld wrote: »

Keep it, borrow £1200 interest free and put it in savings.

I think I will do with this account, I don't actually use the account day to day, the money is mostly just sat in there and the overdraft untouched, a waste of an interest free overdraft I guess.

anselld wrote: »

Why? The tax man would frown on this as far as your Mum is concerned. If you want to shelter money long term from tax you would be better getting your own ISA. If you just want good interest rate get a savings account and submit an R85 form for payment of gross interest. (assuming you are non tax payer)

The reason it's in her ISA is because much of the money is from an account my grandparents opened when I was born and put a little bit into over the years, when I was about 15 my grandparents gave the money over to my mum to look after, and simply because I've never touched it we've never bothered moving it into my name. But hopefully now I can find an account with a decent interest rate and make the most of it.

anselld wrote: »

Keep if you want to use them or ditch.

I think I will keep open the Nationwide account as it did come in useful being able to use the debit card abroad as and when we needed some cash, and knowing we were getting the best possible exchange rate.

anselld wrote: »

Take your pick from moneysupermarket.com. Perhaps ING Direct. 5% for a year, quick to open and accepts Faster Payments from your Bank so no interest lost in transit.

I was looking at the ING account, but then people were saying it's not covered by the UK compensation scheme so that put me off a little bit.

anselld wrote: »

If you can be disciplined and pay off each month why not get Egg Money? 1% cash back on everything you spend and 4% interest on positive cash balance. You can effectively treat it as a reasonable interest paying account with debit card if you don't like the thought of credit.

Is it a credit card? I just hate the thought of them, I've promised myself I won't get another one, as a few years ago I suffered from depression and my income stopped, and I maxed out my credit card ended up paying quite a bit in charges and it was just a major source of stress to me. It was only about £500 which to some people would seem tiny but to me it was a really big deal, after that I paid it off as soon as I got better and haven't taken out any credit since.

anselld wrote: »

Answers the question above!! You will no doubt pay tax one day. The only advantage of using an ISA now (if you can afford not to touch the money) is that you start building up your tax free "pot" at up to £3600 per year.

Am I understanding it right then, if I open an ISA now, I can only open one ISA with any bank this financial year (what date does the "year" restart by the way?). After the first year, can I then leave that money in the first ISA and open another one, and then pay into that, and have both tax free? And in that case, even if I find a savings account that would pay a higher interest rate at the moment, it would be a good idea to start building up some ISA's anyway in preperation for when I graduate and have to pay tax Not sure if I have got the right idea there or not.

anselld wrote: »

If you don't like the "mess" of lots of accounts just keep your current account and a good savings account. (And an ISA if you feel the need)
Savings accounts are not listed on your credit file. Overdrafts might be though when I checked mine it wasnt. Any credit agreements are, but that is not a *bad* thing provided you don't miss any payements or exceed your authorised limit. In fact I suspect lenders like to see some *good* payment history.

I HATE the mess of lots of accounts, haha. I think I still want to change current accounts as like I said earlier, I'm not sure that my current overdraft is 0% and I always have minimum £1000 in there which is not earning me a penny in interest. I could easily meet the £500 pay in monthly requirement of the A&L account but it's just the credit check that might cause a problem, I don't have a bad credit file but being a student I might not pass their requirements. But I might apply and see what happens.

anselld wrote: »

Good luck. The fact that you have got to this site suggest you might come to enjoy the challenge rather than having your brain boggled.

Thank you I'm sure I'll get my head around it eventually, it's just a lot of information to try and get to grips with when it's something you've never really considered before, especially when as the guides make clear, everyone's situation will have a different solution. I do wish I'd got round to this back when interest rates were better, but hey, better late than never :beer:

anselld

mouthscradle wrote: »

Is it a credit card? I just hate the thought of them, I've promised myself I won't get another one, as a few years ago I suffered from depression and my income stopped, and I maxed out my credit card ended up paying quite a bit in charges and it was just a major source of stress to me.

Yes, it is a credit card, but you could request a low credit limit and keep it in credit. But hey, *don't do it* if it is going to stress you, same with the 0% borrowing above. Interest rates are pathetic anyway so if there is stress involved for you (and that is a personal thing) it really is not worth it!!

mouthscradle wrote: »

Am I understanding it right then, if I open an ISA now, I can only open one ISA with any bank this financial year (what date does the "year" restart by the way?).

Correct. Next year starts 6th April.

mouthscradle wrote: »

After the first year, can I then leave that money in the first ISA and open another one, and then pay into that, and have both tax free? And in that case, even if I find a savings account that would pay a higher interest rate at the moment, it would be a good idea to start building up some ISA's anyway in preperation for when I graduate and have to pay tax Not sure if I have got the right idea there or not.

Yes, you can have new one each year so long as you only add £3600 max to any single ISA in the year. And yes, that money is then tax free for life unless you withdraw it or the Chancellor changes the rules.

mouthscradle wrote: »

I could easily meet the £500 pay in monthly requirement of the A&L account but it's just the credit check that might cause a problem, I don't have a bad credit file but being a student I might not pass their requirements. But I might apply and see what happens.

Yes, go for it - looks like a good account, no harm in asking.

Good luck!

mouthscradle

Thanks again anselld

anselld wrote: »

Yes, you can have new one each year so long as you only add £3600 max to any single ISA in the year. And yes, that money is then tax free for life unless you withdraw it or the Chancellor changes the rules.

Just to clarify, cos I want to make sure I've got my head around ISAs properly, in year 2, say I have two ISAs with different banks, can I still only deposit up to £3600 within that year? So if I were to withdraw some from bank 1 and then wanted to redeposit there, would that mean I couldn't put the full £3600 into bank 2 aswell?

And, what exactly happens if you withdraw the balance entirely (but don't close the account), you lose that year and your allowance starts again from year 1 when you next deposit? What about if you withdraw and leave a few pounds in, do you keep that years allowance then? Is this why once you start with ISAs you should never withdraw, only ever transfer the money to a new ISA? The reason I ask, is that in a couple of years I will probably need to use most of my savings for a house deposit, so I wouldn't want to lose my built up two years of allowance just as I graduate and start paying tax

I've found out about my Barclays current account, my overdraft has an interest of 17% so I definitely won't be using that and have applied this morning for the A&L current account with the £50 quidco and the £100 sign up offer. I had an email back saying I'd been accepted I've also closed down my Cahoot savings account. Now I just need to decide what to do about a savings account.

CLAPTON

To be clear
suppose you have opened an ISA in year 2008-9
and you open a second ISA in 2009-10 and deposit some money

then in 2009-10
you can deposit up to 3600 in second ISA
you can't deposit any money in the first ISA
you can withdraw money from the first ISA but you can't replace it

if you put say 1000 in the second year ISA, then withdraw the full 1,000 then you can only put 2,600 in (assuming the ISA hasn't closed your a/c)

That is why it is said you shouldn't withdraw money from ISAs. However, if you need to money (especially for house purphase ) then you need the money its as simple as that. We are not talking megabucks here, merely a bit of tax on a bit of interest.

mouthscradle

CLAPTON wrote: »

That is why it is said you shouldn't withdraw money from ISAs. However, if you need to money (especially for house purphase ) then you need the money its as simple as that. We are not talking megabucks here, merely a bit of tax on a bit of interest.

Thanks Clapton, I understand it now. In my situation then, with it being extremely likely that I will need to use almost all of my savings when we buy a house, with ISA rates being quite poor at the moment, and with the fact that I wouldn't pay tax on a savings account anyway, I think I am going to give the ISA a miss and just opt for a savings account.

I've worked out that to get the maximum interest from what is available at the moment (without having to lock my money away for 1 or 2 years, just incase) I would need to open the 5% ING Direct savings account and then dripfeed from that into the 6% Barclays Monthly Saver at £250 a month. Although this would only get me like £20 more a year than just leaving it in the 5% account, so I need to decide whether it's worth the hassle. Also I'm still not sure about the ING security thing, incase I should ever need the compensation. :rolleyes: