First Direct e-savings account - Highly recommended

Goldilox

Hi...I have been banking online with first direct for ages now. I have an online savings account with them but have also recently opened their e-savings account.

I occasionally dip into my savings account but there is a real incentive not to touch the money in my e-savings account because if I do I don't earn any interest that month.

Anyway...here is a bit more info that First Direct just emailed me about the e-savings account. I highly recommend their service.

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We are writing to inform you that with effect from 18 April 2006, the e-Savings Account interest rate is 4.75% AER (4.65% gross).

The e-Savings Account is a market-leading account that continues to reward savers by paying a full quarter of a percent more interest than the Bank of England Base Rate and

- ING Direct Savings Account
- Halifax Web Saver and
- Egg Internet Only Savings

all of which are currently 4.50% AER.

The e-Savings Account pays a great rate from just 1 pound and continues to reward savers, not spenders, by paying 4.75% AER. No interest is paid on the entire account balance in any month you make a withdrawal. Further details can be found at https://www.firstdirect.com/savings.

important notes
All competitor rates were correct as at 12 April 2006 and are variable. Competitor rates were sourced from competitor websites. All rates quoted are the rates payable on a balance of 1 pound - bonuses may apply.

AER: The Annual Equivalent Rate is a notional rate which illustrates what the gross rate would be if interest was paid and compounded each year. Gross: The rate paid before the deduction of tax applied to interest on savings. first direct is a division of HSBC Bank plc which is a member of the Financial Services Compensation Scheme. As at 31 December 2004, our paid up capital and reserves were 17,961 million pounds. HSBC Bank plc is a member of the HSBC Group, one of the world's largest banking and financial services organisations. In respect of deposits with a UK office, payments under the Scheme are limited to 100% of the first 2,000 pounds of a depositor's total deposits with the bank and 90% of the next 33,000 pounds resulting in a maximum payment of 31,700 pounds. Most deposits made with offices of the bank within the European Economic Area and deposits denominated in all currencies are treated alike. Further details of the Scheme are available on request.

Zwicky

First Direct sent you this message because they have just reduced their e-savings account rate from 5% to 4.75%. It is true that 4.75% is better than some other banks/bs but what they don't tell you is that there are also some which still pay higher rates.

As you are aware, you cannot dip into the e-savings account because it has a disastrous effect on interest earned and in fact the only way to withdraw funds is to do it on the first day of the month and withdraw the whole balance. I understand that you are trying not to dip into this account and use another FD online savings account for this purpose but do you know what rate of interest you are earning on this other account? If it is the same as the savings account listed on the FD web site it is between 0.10% and 3.50%. This is a very poor deal in the current market.

You could for example open an account with Birmingham Midshires ( https://www.askbm.co.uk ) and get 4.95% with no penalties for withdrawals.

Never trust a bank or bs to give you the full story. They all play the same game and only quote the comparative rates which are lower than their own.
You can easily check this on this site by looking at the Savings & Investments /Instant Access page or looking at some of the postings on this forum.

Lucy_Locket_4

Zwicky wrote:

As you are aware, you cannot dip into the e-savings account because it has a disastrous effect on interest earned and in fact the only way to withdraw funds is to do it on the first day of the month and withdraw the whole balance.

I opened one of these before they reduced their rate to 4.75%. I'm thinking of moving my money elsewhere now. So are you sure that their "month" is a straight calendar month? If so, I will move my money on the 1st.

Also, does anyone reckon that a lot of interest is lost in the time it takes to transfer money between different banks, as this can often take 3 days?

Still quite new to this rate tarting lark, so help would be appreciated.

skiddy2k

Lucy_Locket wrote:

So are you sure that their "month" is a straight calendar month? If so, I will move my money on the 1st.

yeh, its the 1st day of each month... doesnt matter if its a working day or not

Lucy_Locket wrote:

Also, does anyone reckon that a lot of interest is lost in the time it takes to transfer money between different banks, as this can often take 3 days?

nah, its a small ammount... if you do think its a lot of intrest, you must be a serious moneysaver!... but its not too much in my opinion... no point being too fussed about 3 days worth of intrest

Zwicky

Lucy_Locket wrote:

Also, does anyone reckon that a lot of interest is lost in the time it takes to transfer money between different banks, as this can often take 3 days?

It really depends on how much money you have in the account. If for example you have £100,000, 3 days interest lost is about £40 at 4.75%.

What is more important is how long will it take you to make up this loss by moving to a higher rate. Unfortunately if the difference in rates is small it takes quite a long time. The difference between FD and BM is only .20% so for each days interest lost at 4.75% it will take 24 days at the higher rate to make it up.

Plus you may actually lose more than 3 days because you also have to allow for how long it takes to move the funds into the new account.

This all sounds like bad news but if you intend to save for the long term you will probably gain in the end and in this case you will also have the advantage of no restrictions on withdrawals.

Ted_Bloke

Zwicky wrote:

Plus you may actually lose more than 3 days because you also have to allow for how long it takes to move the funds into the new account.

Think I've said more than once before on this site, but with the kind of concerns expressed in this thread, the very first time you move money between accounts and into a new it can take longer than when it is up and running. So move first a 'pilot' of a small amount say £50, do it more than once if nec. to see how fast it goes and then when up and running send the main amount. Then you'll be able to minimise the time where it is somewhere not getting interest.

For those who are not too sure when handling figures a rough rule is this: the going rate for the sort of savings we talk about here is just under 5%, so say 5% in round numbers. There are about, again in round numbers, approx. 50 weeks in a year, so 5% p.a. interest is 5% divided by 50 = 0.1% per week. If you're going to lose a week's interest it's hardly worth moving money for a 0.1% better rate, and even for 0.2% difference best take those precautions I mentioned.

Sorry if this is too elementary for anyone. If you're OK with figures you'll also realise it's not worth calculating any more precise than that simple rule.

lolly5648

Thanks Ted, you have explained this very well and I am going to follow your advice and open a BM account with a small amount and then when it is up and running transfer my money from ING

Stonk

lolly5648 wrote:

Thanks Ted, you have explained this very well and I am going to follow your advice and open a BM account with a small amount and then when it is up and running transfer my money from ING

What Ted says about the initial transfer taking longer is particularly relevant to Birmingham Midshires compared to some other banks. The first transfer you request gets taken a massive 10 working days after you request it. For me, this meant 15 real days, because it took in 2 weekends and a public holiday.

Zwicky

Stonk wrote:

What Ted says about the initial transfer taking longer is particularly relevant to Birmingham Midshires compared to some other banks. The first transfer you request gets taken a massive 10 working days after you request it. For me, this meant 15 real days, because it took in 2 weekends and a public holiday.

I think that the initial transfer takes 10 days because that's what they allow for the direct debit to your nominated account to be set up but in fact you can transfer funds into the account by other means before the 10 days is up.

In my case the initial transfer of £1 will not go through until May 2nd but I initiated a transfer from my Cahoot account on April 25 and it appeared in my BM account on April 28th.

It seems that it is only the direct debit transfers from your nominated account that are held up for 10 days. If you use BACS or CHAPS and just enter the BM account details it will go through within the normal time constraints.

lolly5648

Zwicky wrote:

It seems that it is only the direct debit transfers from your nominated account that are held up for 10 days. If you use BACS or CHAPS and just enter the BM account details it will go through within the normal time constraints.

Thanks for the additional info - I will look into this.

Lolly