First Direct to launch 6.25% mini cash ISA

gerryco

I don't see how First Direct can legally call the 6.25% an AER when the rate reverts to 4.35% in October.

AER is supposed to reflect the amount which will ACTUALLY be earned over a year, taking into account all charges, fluctuations, etc.

Isn't it?

isasmurf

I've been wondering the same thing. I don't know how FD can get away with advertising two different AERs for the same thing.

I don't think it is illegal, but reading the BBA's interpretation of the code of conduct for advertising interest bearing accounts it could be against the Banking code, depending on your interpretation.

The BBA say

If a bonus rate is payable until a fixed date (for example, "payable until 1 December 2003" and the product is launched on 1 May 2003), the AER will change over the period. The AER at the time of the product launch will be higher than that towards the end of the bonus period. This gives rise to scope for the AER to be misleading if it is not recalculated on a regular basis. It is not, therefore, enough for advertisements simply to state in the supporting wording the date of calculation of the AER. Instead, AERs on such accounts should be recalculated on a monthly basis. This means that posters and leaflets, as well as newspaper advertisements etc, need to be changed monthly, if such accounts are being advertised.

To me this reads that FD should be recalculating their interest rate on a monthly basis.

Bob_Frapples_3

AER is supposed to reflect the amount which will ACTUALLY be earned over a year, taking into account all charges, fluctuations, etc. Isn't it?


Isasmurf mentioned the BBA so I had a look on their website...they've got a page

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=135&a=1575

that shows some pretty scary calculations but there was one thing they said that seemed to make sense

"The AER is a notional rate - it is not necessarily equal to the cash return because, in calculating it, we make assumptions: "

and then it goes on to get all technical again..

Don't know if that helps at all...?

guavagroove

Only the maximum of £3000. I have a similar situation, and have been told that the rest of any interest earned from 04/05 should be put somewhere else. It is my understanding that if you open a mini cash ISA for a year which requires the maximum of £3000 (My choice this year is Abbey 5.5% choices Isa) to open it, any interest from the previous year will be paid back to you, or can be mover into another account you nominate.

As for the first direct mini Isa 6.25% account - It sounds like people are saying put the money in FD for 7 months, then in Oct, remove it and add it to another ISA, e.g. Abbey (assuming the rate offers are still available). Reading the rules and regs, it sounds possible. But still unsure....

guavagroove

I made it £170, only £5 more than just opening an Abbey choices Isa @5.5% for one year.

Correct me if I'm wrong anyone.....Is it worth the agro for £5....not for me

deemy2004

Yeh, not worth the agro, I mean your time and effort spent on it is worth more than £5 !

BlackCat

I'd greatly appreciate it if someone could explain how the following would work.

I have £3000 in an Abbey National ISA which was opened in the 2004/2005 financial year. This will pay the interest at the end of the financial year which, I assume, means that I will get it in April 2005.

I'm interested in transferring this £3000 into FD this financial year, and then paying in another £3000 in April. As I haven't yet received the interest for 2004/2005 do I take it that I have no way of transferring the interest into FD? Will I end up with the interest left in the Abbey ISA and the rest of the money accumulating interest in the FD ISA?

Thank you for any help you can give.

jimclark1967

Abbey pay their interest on 1st March each year so it'll already be in your account. (From terms & conditions: "For the Easy ISA, Postal ISA or Variable rate TOISA,AN plc will calculate interest daily and credit it, in accordance with your instructions, each year after close of business on 1 March.")

It seems as clear as mud from the First Direct terms & conditions whether you can add another £3000 after 6th April, does anyone know for certain?

Milarky

jimclark1967 wrote:

It seems as clear as mud from the First Direct terms & conditions whether you can add another £3000 after 6th April, does anyone know for certain?

Yes, you can add another £3,000 after the 6th April. However, as this would be a 'current year' subscription rather than a 'transfer' [of a separate 'current year' subscription] Your options are:

1) Transfer £3000 [plus interest if already added] before 5th April OR

2) Open the ISA 'from new' with £3,000 also before 5th April AND/OR

3) Subscribe a further £3,000 after 6th April [not a transfer]

The 'current year transfer' rule seems to limit transfers just to one year [2004/05] but cannot have any bearing on the operation of the account in subsequent years - and therefore you may pay more money in later.

carpy

i've currently got a hsbc isa @5.25%

is it worthwhile transferring out £3k into FD isa @6.25% and then will i be able to transfer back into hsbc in october?