5% interest current account v 2.75% ISA?

evosy1978

Hello all, just wondered which is the best.

Santander 5% on the first £2500 or put the money in a 2.75% ISA account?

Thanks

Mikhail

'Best' for what? £10 or £5000?
Use a calculator!

opinions4u

The net rate after 20% tax deduction for Santander is 4%. It's effectively 3% for a 40% taxpayer.

Don't underestimate the longer term tax benefits of being in a cash ISA if you're able to top up funds each year.

evosy1978

evosy1978 wrote: »

Hello all, just wondered which is the best. for

£2500

Thanks

Thanks opinions 4 you. so basically its 4% versus 2.75% on the £2500. no brainer to me. quite a good deal with £100 bonus for new account aswell.

I only have £2500 to my name.

What could be longer term benefits??

Stuart_W

Don't forget that the 5% (4% after tax for basic rate taxpayers) is subject to three main conditions

1. It's only for 12 months - it reduces to 1% after a year.

2. It will only be on the first £2,500 - so whilst you say this is how much money you have, whilst you'd be getting interest added monthly, you won't be earning interest on your interest if that takes your balance over £2,500.

3. You also need to make sure that you pay in at least £1,000 each month, otherwise you earn no interest at all.

I'm sure you've spotted these already. Including the £100 bonus, it remains an excellent rate of return if you follow the rules.

evosy1978

Yes thanks for the info, Id already read it.

It say you need 2 DD or standing orders a month aswell.

Im going to set up 2 standing orders from my main current account to another current account that I rarely use for the sum of £1000. Ill also set up 2 standing orders from this account back to my main current account again for £1000.

Its then the account I rarely use which ill switch to santander... With all the terms completed.

Will this be ok?

dontgetcaught

you can move the money in smaller chunks better

evosy1978

oh ok..


Not a problem because I could do 2 standing orders a week so £250ish a week between them?

why would they have a problem with faster payments? by faster i presume you mean the £1000 all at once..

ta