First Direct to launch 6.25% mini cash ISA

simonkirkland

Alot can change between now and October, the 6.25% is a fixed rate but the rate after that is not so it could go up or down. Either way it's best to always keep an eye on other banks rates. If 'makeurich' bank gave a better rate in 3 months time there's no cost and not much hassle to change..

I still haven't had my acount set up. They say 48hrs but I knew it would be slow as when I phoned up they had 650 applications to sort out at the start of the day. I emailed them and the replied apologising for the delay and saying it would be setup shortly. First direct's customer service (and HSBC as they are the same people) is superb...

Reaper

simonkirkland wrote:

First direct's customer service (and HSBC as they are the same people) is superb...

Although owned by the same company they seem to keep themselves very much apart. I have heard plenty of people moaning about HSBC customer service but it is very rare to hear a complaint about FD's.

simonkirkland

A bit off topic but... I've been with HSBC for 6 years and my partner has been with them for over 10 years and I have always found their customers service on par with FD.

Once I incorrectly setup my credit card direct debit and instead of taking full payment it took the minimum (my fault) and I got the usual interest added to my account. I phoned up a few weeks later when I realised and they refunded my the interest!!! (and setup my DD for full amount)

You can't do better than that...

Simon

WilliamT

This may clarify or further confuse the situation.

I'm unusual in this thread so far in that I'm an existing First Direct customer, with a maxi-ISA of several years standing (re: the comments about HSBC, HSBC actually run, or ran, the original First Direct stocks + shares ISAs, mine is in the HSBC Household Names Fund).

Anyway, the Maxi ISA cash components pays 4.35% AER (interest paid quarterly) - that's the same non-bonus rate of the new e-ISA. I was trying to see if I could transfer £20k+ from the old maxi cash account to the new mini e-isa one and keep the stock/shares bit intact.

It looks however like its pretty pointless. First Direct told me that "the e-ISA will not be opened up to the inward transfer of other first direct ISAs until 06-Oct-2005" (ie. when the bonus rate finishes). So I'd only get the higher rate on a max of £3,000 for 6 months before it went back to how it was before, and that would mean I couldn't put any money into the stocks/shares bit.

There were a couple of other interesting things in the email reply I got:

"Having subscribed to a Maxi ISA this tax year you are ineligible to open a Mini ISA of any kind until 06-Apl-2005." (I thought you could still transfer existing money).

and

"As you have subscribed to your maxi ISA during the present tax year you are only free to transfer earlier tax year subscriptions in either element independently of the other element. If any sums subscribed this tax year are to be transferred then both elements must be transferred as a Maxi ISA." (this bit seems to invalidate the previous quote).

Anyway, make of all that what you will.

William

isasmurf

WilliamT wrote:

"As you have subscribed to your maxi ISA during the present tax year you are only free to transfer earlier tax year subscriptions in either element independently of the other element. If any sums subscribed this tax year are to be transferred then both elements must be transferred as a Maxi ISA." (this bit seems to invalidate the previous quote).

I think I can see what they are saying here, but that's only because I know the rules. It's pretty badly worded, and would easily confuse anyone that is not familiar with what the ISA rules are - even I had to read it a couple of times.

Just in case anyone is confused with what they are saying I'll try and clarify it, but as I've had a bit to drink I'll probably confuse you even more!

What they are saying is you can transfer previous years subscriptions in cash or stocks & sahres independently of the other. So you can transfer Stocks & Shares to another Stocks & Shares ISA and leave the Cash in the Maxi ISA, or transfer Cash to another Cash ISA and leave the Stocks & Shares in the Maxi ISA, or you can transfer both to different ISAs. If you transfer current years subscriptions in a Maxi ISA in both Cash and Stocks & Shares these must be transferred together because you can only subscribe to one Maxi ISA in any one year therefore you cannot transfer just the cash part to another ISA as you will have deemed to have subscribed to two Maxi ISAs.

Hope that makes sense. I'll gess I'll know when I log on next and wonder what on earth I was on about!

simonkirkland

Just to let you all know. I had a message last night telling me my new e-ISA was setup and that I'd be able to view and access it in 2/3 days time. Quite poor really as it took over a week to setup and they say it would be done in 48hrs but it's understandable considering it's such a good offer...

Simon

Paul_Varjak

The fact that this particular thread has been read over 3,000 times (instead of the usual 25-200), is testament to the fact that people are attracted by 'headline' rates!

Milarky

Just seen that my new FD account was set up yesterday (17th). Nationwide had withdrawn the amount eight days eariler (9th) and sent cheques.

I'm not particularly complaining at this sort of delay - although I will lose interest from the 9th - 17th, I expect. But this is something that always needs to be born in mind when transferring for a better rate. NW was 5.15%, FD is 6.25% [AER] so that works out at about: 8 days x (5.15%)/(6.25%-5.15%) 38 days! I will thus 'break even' after 24th April...

So even a relatively short delay impacts on the benefits of staying put.

Another consideration is that next year's subscription must be sent from an external [non FD] account and takes at least two days during which no interest can be earned. Had this been paid into existing NW ISAs [which are still there, BTW] there would be no delay as the transfer would have been done 'internally'

Next year's subscription will therefore lose two day's interest going in - Say from 4th to 6th. On 5% [4% net, as it from a non-ISA source] that will take 2 days x (4%)/(6.25%-4%) 4 days - 10th April to 'break even'. As the second subbed amount equals the first amount it will bring the combined 'break even' date forward to the mid-point of the two dates - to about 17th April I imagine.

[Hope that helps]

lipidicman

I had this equation handy T = transfer time, N = new rate (as multiplier eg 6.25 is 1.0625)
O = old rate. B = break even time

B=T/((lnN/lnO)-1)

8/((ln1.0625/ln1.0515)-1) = 38 days

So we get the same answer (but I havent tried to derive the equation yet)
Nice thing with this equation is you can use it to work out the new rate needed for a given time of say 4 or 8 days transfer for it to be worthwhile, ie so the break even is before you need the money etc.

Add the cost of the fact that you will also have to transfer out at the end - I just cant be bothered with this!

Hobo_2

Seems unusual for a bank, eg: for a couple £6k in 04-05 @ 6.08% till 6th oct then transfer out with no penalty to avoid 4.35%!