3% ISA or an 8% savings account?

MoneySaverLog

First Direct 8% HSBC 6% then use the money at the end of 12 months to fund the following years ISA.

Best to have the money mature around March/April when ISA season starts.

Milarky

Freecall wrote: »

But surely the whole point of an ISA is that it is forever (ignoring legislative risk), you get the benefit over and over again.

As you correctly pointed out 'the guarantee' is only good for 'today' - so comparisons with ISAs should be similarly like for like.

3 percent or 8% (or 6.4%) (or 4.8%).... and they have to ask?

The principle of 'the savings fountain' is very simple (wake up there year 3..) start with accounts paying the highest nominal (net) rates and work your way down to lower rates. People who come along saying ISAs 'must come first' are talking speculative 'lossy' ISAs not cash ISAs. Clearly if you're just in cash highest rates first.. always

AFK_Matrix

Ok sorry for resurecting this but had another idea. So instead of doing the FD 8% saver account I am thinking about doing the Santander 123 current account.

Now before you call me utterly crazy hear me out lol. So on the FD account and if I have 2000 in the 3% isa I would get around £184 in a year.

Now I think I can get more than that with the current account because of their cashback and interest deal. So I get cashback for the DD i have setup with the council etc and using their calculator that will be £64 a year.

Now here is where I come unstuck a little. Now they give 2% on balances upto 3000 and then 3% for 3000-20000. Now what I will be doing is having 2200 to start with and then adding 300 a month, which will mean I will eventually have 5800. Now what I can't work out is the monthly interest I will earn as the money goes up? I think it works out at around 80 but could someone confirm?

So if I am right I will get £144 in interest minus £24 as it cost £2 a month for the account. I also don't have the hassle of switch my DD across to FD.

Hope that makes sense lol.

innovate

Don't think you'd be making much more than approx £118 gross on the Santander interest (very approx interest calculation, assuming there is 30 days in each month). So that's about £95 net for a basic rate tax payer. Making some £159 with the cashback. Though you could get the cashback anyway. And also, paying the Direct Debits might fluctuate the balance on which you get interest. Thus your interest payments may be a bit lower than the £118 above.


The FD regular saver pays about £124 net for a basic rate tax payer (assuming £300/mth deposits) - about £30 more than you'd get in interest from the Santander 123.

You do not need any DDs switch to FD to become eligible for the Regular Saver. Only reason you'd do that is if you wanted the £100 joining incentive. In which case, you'd also need to pay 1.5K/mth into FD for at least 6 months (until they paid the joining incentive).

If you can afford it at all, do all of them!

EDIT: some ideas for "cheap" DDs here: https://forums.moneysavingexpert.com/discussion/4168667

psychic_teabag

I'd forgotten about the 123 account - just looking into it now. But I think you need to look at the cashback and the interest separately. If you look at just the interest part, there's no point getting up to 3% taxable from Santander when you can get 3% tax-free in the ISA.

If the cashback on the 123 account covers the monthly fee, then it would be worth doing for that alone. Unfortunately, if you don't keep the balance above 3000, any balance you do keep in there is earning less interest than it could elsewhere. If you can arrange for money to be transferred in just in time to pay your bills, that would work best, but need to take care you don't go overdrawn.

AFK_Matrix

Thanks again for all your help guys. I have gone for getting the Santender ISA (already got this setup and £500 sitting in there at the mo) and then also the FD regular saver.

Bit of a pain with FD though as I have previously had an account with them and they wanted to go through security questions to get at my details but unfortunetly all my details have changed so I am having to send them a written letter with all of my new details on so I can go through the security questions to get to my details grrrr.

But hey I am in no urgency and I am also transfering my DD's and salary across so don't pay the £10 month fee.

psychic_teabag

I had exactly the same problem with FD : had an ISA with them years ago, and then when I tried to open reg saver, they expected me to remember the security details.

You don't need to transfer anything to FD to avoid the fee - a qualifying savings account with balance of £1 is sufficient. (But transferring would give you the switching bonus if that's still on offer.)

AFK_Matrix

Thanks psychic teabag I will ask about setting up the savings account (I assume you mean their Everyday e-saver account?) as that will save a lot of hassle.

AFK_Matrix

Just a quick follow up question.

I have just gone and applied for the 1st account over the phone with FD and it's been referred and I need to wait to see if they accept me??

So I am a bit concerned they aren't going to approve it, would getting a M&S CC a few months ago and an ISA just recently affect my credit score that much that I would be rejected for the current account?

I am now a bit concerned whether I should go ahead with trying to open a new Santander 123 account as I am thinking this may get rejected because I have applied for the FD and ISA accounts?

MoneySaverLog

The ISA will have no effect. The credit card might, depending on the amount of available credit you have to income. Do you have any other lines of credit?

Are there any nasties on your credit file? Do you have any joint accounts?