Fixed rate bonds

harpix42

Hi everyone!

I am a student on a 5 year medical course entering the world of work in August 2012.

I've been working hard in between my degree and saving smartly to achieve a sum of roughly £15,000.

I am looking to invest my money and thought the best thing would be to lock my money away for some time in a fixed rate bond. (Ideally i'd like some sort of account that gives me interest every month but only if i dont withdraw! But i cant seem to find any like this.)

So back to bonds...I found the Bank of Baroda bond option which gives 3.15% over a year or 3.80% over two years.

I also found an option with HiSave (ICICI Bank) which is 3.7% over two years but its interest is paid monthly.


So here are my questions:

1) is the bank of baroda a good option for me or are there better out there?

2) The bank of baroda pays interest "on maturity (compunded annualy)". Can someone explain what this means? Is it beneficial to have interest paid in this way?

3) the HiSave option pays interest monthly, is this a better way of earning interest than the bank of baroda option?

4) and lastly, am i right inthinking you cannot make deposits into a bond


Thank you very much

D1zzy

Another option
3 x LLoyds vantage current accounts with 5K in each will pay you 4% on each -interest paid monthly (lots of threads on here)
It's instant access so you will just have to use willpower not to withdraw. If the balance drops below £5000 the interest rate drops

harpix42

D1zzy wrote: »

Another option
3 x LLoyds vantage current accounts with 5K in each will pay you 4% on each -interest paid monthly (lots of threads on here)
It's instant access so you will just have to use willpower not to withdraw. If the balance drops below £5000 the interest rate drops

thanks for your advice, sounds good

Maybe a stupid question but is it legal to have three of the same current account?

Also, how likely is it that the 4% will stay at 4% for a prolonged period of time?

Cheers

D1zzy

harpix42 wrote: »

thanks for your advice, sounds good

Maybe a stupid question but is it legal to have three of the same current account?

Also, how likely is it that the 4% will stay at 4% for a prolonged period of time?

Cheers

Yes you can have 3 (many of us have more -before they restricted it to 3) -its been 4% for over 12 months. They could change it whenever - but make hay and shift it when they do.

You have to pay £1000 through the accounts each month - but you don't have to pay in any new money just do on-line transfers
a>b>c>a (takes about 30secs) each month.

smallfry27

harpix42 wrote: »

Also, how likely is it that the 4% will stay at 4% for a prolonged period of time?

It is not fixed rate so could go up as well as down. You'll have to monitor it.

On your original questions, bonds are usually a fixed amount for a fixed term for a fixed rate. But you may be able to take out more than one bond under the same terms, depends on the product's rules. There is usually a penalty for early withdrawal, so you might consider putting it in smaller chunks, then if you do have to dip in early, you won't pay a penalty on the whole lot.

'Paid on maturity (compounded annually)' means you will get exactly the same amount as if they added the interest each year, but you won't see it until the end of the term.

If you opt for monthly interest, you will start to earn compound interest in your second month. However the banks usually make the monthly interest rate slightly lower to the annual option, so there is probably not much in it either way. You could set up a simple spreadsheet to see how the various options work out over time.

Well done for saving while being a student. Most of them seem to end up in debt.

harpix42

Hi, thanks for the messages.

I just went to setup a LLoyds TSB vanatge account online and one of the requirements was that "you do not own a LLoyds Current account".

Is this a rule you just ignore? I dont want to get into trouble for having 3?

Also, do you need to use different addresses for the account?

thanks!

xrjtg

It probably just means that they don't want additional accounts to be opened through the new customer system.

I have two accounts, both registered to the same address. Their online baking kept asking me if I wanted to open extra current accounts, but I had to go into a branch to actually open them.

D1zzy

harpix42 wrote: »

Hi, thanks for the messages.

I just went to setup a LLoyds TSB vanatge account online and one of the requirements was that "you do not own a LLoyds Current account".

Is this a rule you just ignore? I dont want to get into trouble for having 3?

Also, do you need to use different addresses for the account?

thanks!

If you already have an account -you can upgrade it to Vantage (that's 1) -if you can't open the other 2 on-line (some people had probs) just go into a branch & they will do it 4 u. Take a copy of the web page that says 3 are allowed -just in cae you get a jobsworth

D1zzy

D1zzy wrote: »

If you already have an account -you can upgrade it to Vantage (that's 1) -if you can't open the other 2 on-line (some people had probs) just go into a branch & they will do it 4 u. Take a copy of the web page that says 3 are allowed -just in cae you get a jobsworth

No different addresses required, its perfectly legitimate. (I and may others have 7)

harpix42

Thanks a lot for all your replies.

Few more questions if that's ok...

1)The allowance of 3 current accounts...is that with one bank or with any bank?
(I have a student account with Natwest and a bank account with HSBC.... does that mean i'm only allowed to open one more current account)

2) At the moment my money is in an Alliance and Leicester bank account that pays interest annually every October. The interest rate was a bonus rate up until June 2010 and now it is at a pretty low rate. So my question is.... can i withdraw the money now and get the interest paid now?? Or shall i wait until october?


thanks!

atypical

harpix42 wrote: »

1)The allowance of 3 current accounts...is that with one bank or with any bank?
(I have a student account with Natwest and a bank account with HSBC.... does that mean i'm only allowed to open one more current account)

The 3 current accounts limit is an arbitrary number set by Lloyds for that particular account. You can have as many current accounts with as many different banks as you like.

harpix42 wrote: »

2) At the moment my money is in an Alliance and Leicester bank account that pays interest annually every October. The interest rate was a bonus rate up until June 2010 and now it is at a pretty low rate. So my question is.... can i withdraw the money now and get the interest paid now?? Or shall i wait until october?

Close the account now. Any interest accrued to date will be credited to the account, leaving you free to forget about the account and move the money elsewhere.

I assume being at University you aren't earning over your tax-free allowance of £6,475, in which case have you an R85 applied to the account to get interest paid gross?