Alliance and Leicester Direct Current Account

YorkshireBoy

td_007 wrote: »

No they are not. They are giving you 6% while using your money in the account to loan it out at much higher rates.

Of course they're losing money.

Ignoring the admin costs of running your account, they can borrow at a much better rate than the 6% it's costing them here, ie 3 month Sterling LIBOR is currently around 1.3%.

it works out massively in the bank favour.

Still think so?

td_007

First of all cash is in short supply. Secondly as I said if they can borrow at a lower rate they make a bigger profit than borrowing at 6% (larger differential) - so no I do think the bank is losing money.

YorkshireBoy

td_007 wrote: »

...I do think the bank is losing money.

So you're agreeing with me now?

td_007

YorkshireBoy wrote: »

So you're agreeing with me now?

Sorry typo - NO don't think bank is losing money.

YorkshireBoy

td_007 wrote: »

Sorry typo - NO don't think bank is losing money.

OK, I'll have one last go.

I'm of the opinion that ALL stand-alone current accounts are loss leaders for the banks. They make money by cross-selling other products (mortgages, loans, credit cards, insurances, investment products, etc) on the back of the current account and by the application of charges/fees for transgressions and services provided.

Add in the fact that these A&L accounts can be, and are being abused (I'm abusing one myself with a £10K overdraft stoozed at 5% currently - has been 6.3% for the last 8 months) ...and the fact that they could borrow the same £2.5K (in it's simplist terms) 4.7% cheaper elsewhere...I'm still firmly of the opinion that A&L are losing money on this account.

td_007

I'll have one last go as well.

Your first point (cross-selling, fees) are added revenue streams and contribute to the profit. Banks that give no/very little interest are essentially borrowing money for free and make large profits when it lends the same money out to you and me. With A&L they are taking a hit on the later bit.
We hear more and more of fee paying current accounts essentially because bank are trying to achieve their profit forecasts and hence shareholder returns in a time when tighter regulations cut into profits from exorbitant fees/charges, investment writeoffs etc.

A&L are probably not making as much as they would like from you and me (I have the 8% curr a/c) but I really do not think that taken together the it is losing money on the currect a/cs.

cash-magnet

YorkshireBoy wrote: »

From a business point of view they're (bound to be?) losing money!If you've taken another cheque book (and guarantee card) there's a 'loose' £3K overdraft facility attached to your account.

I suppose there could be this unauthorised o/d available, but I'm sure you realise I'm not looking to borrow anything from them and have no cheque books at all, but I do like getting 6% on these small deposits of £2500 on bank accounts all over the place while they are offering them. Ok, so you have to bounce cash around each month in an efficient way to maximise your returns to "qualify" on these accounts, but as YB knows when it comes to keeping track of where your cash is, and when it needs to be moved and to where, is half the trick to stoozing and is no different to what I do here each month.

slinga

I'm confused about the A & L New Premier Direct Current Account.

I read their blurb and it seems to say £500 required to be deposited each month.

Interest rate of 6% up to £2500.

Where have I gone wrong????????:huh:

molerat

High interest is paid on balances up to £2500.

The account needs to be funded from another bank with a minimum of £500 each month.

It is a current account not a savings account so to use it as such you need to be very active with its management.

cash-magnet

Allow me to clarify for you, but you have read the conditions correctly.

This is how I use this account...

I opened this account and deposited £2500 into it and this balance just sits there month after month. The account isn't actually used as an current account, but just as a savings place for my money, and the bank pays me 6% interest each month on this balance, which is about £9 after tax (a close enough approximation for this explaination).

They require you to deposit a minimum amount of £500 from an external source (another bank account/savings account/cash deposit at counter etc) into this account each month. This is the requirement they make in order that your money gets the 6% interest paid on it. Here's the clever bit... that £500 does not have to stay there, your account simply has to show that you deposited it into the account. Once it has shown up on your account, you then transfer it out again making your balance back down to £2500.

Here's the breakdown for you:

Opened account and £2500 paid in - maximum balance reached and I have met their £500 minimum deposit requirement for that month.

Month 1 - receive £9 interest making my balance now £2509 - pay in £500 - balance now £3009 - now withdraw £509 to bring your account back to £2500

Month 2,3,4... - the same as month 1 and keep repeating this each month after the interest shows up on your account.

No point in leaving any more than £2500 in the account as they will pay you very little interest on anything over this amount (0.01%) and that's why we withdraw to bring the balance back down to £2500. The excess should be sitting in another savings account for the rest of the month if you wish to squeeze the maximum you possibly can out of your money.

Make a note of your account opening date so you know when this 12 month offer finishes. They tend to drop the rates down to barely anything after the offer ends. Do keep a check as they can change these offers mid-term to a worst or better offer. Abbey offered this sort of account paying 5%, but now an identical offer is running but this one now pays 6% for the 12 month term. Don't be afraid to drop and old account and "defect" to their better offers, I do all the time! Like it has been mentioned, the banks only "allow" you to hold one of these accounts at a time but as you can see, this is not always the case, so I have held on to my 5% accounts and opened the 6% one as an extra. 5% is still a good return on each £2500 deposit.

Hope this helps you and best of luck to everyone.