Is the Santander 123 Account Worth it?

innovate

macman wrote: »

I doubt that they'd allow you to open more than one account though, since it is (in theory at least), a current account and not a savings account. And in addition to the tripled monthly fees, you'd also have to fund an extra £1K per month, and set up 4 more DD's.

I think you might find that you are wrong. Also, you wouldn't need to find an extra £1K - you can use the same £500 that funds your first account. Setting up another couple of DDs is a doddle - or you might be able to re-designate and/or re-use some existing ones, depending on what DDs you chose. The fee can in theory be avoided (if you have 6 qualifying DDs) but it could become quite fiddly. However, even with the fee, the AER would be some 2.88% - not the best instant access rate you can get, but quite good

Gromitt

I know this is pedantic, but I'm interested where you get 2.88% from. Maybe my maths is off, but it doesn't seem to be:

20000 * 0.03 = £600
* 0.80 = £480
-£24 = £456

20000 *0.0285 = £570
* 0.80 = £456.

MarkFromCornwall

Gromitt wrote: »

I know this is pedantic, but I'm interested where you get 2.88% from. Maybe my maths is off, but it doesn't seem to be:

20000 * 0.03 = £600
* 0.80 = £480
-£24 = £456

20000 *0.0285 = £570
* 0.80 = £456.

That must be very nearly right, but doesn't the fact that you pay the £24 in 12 monthly instalments mean that it's not quite accurate (unless you keep paying in £2 to make up for the £2 that is taken each month). I'm not sure if that accounts for the discrepancy.

YorkshireBoy

Gromitt wrote: »

I know this is pedantic, but I'm interested where you get 2.88% from. Maybe my maths is off, but it doesn't seem to be:

20000 * 0.03 = £600
* 0.80 = £480
-£24 = £456

20000 *0.0285 = £570
* 0.80 = £456.

You won't benefit from compounding (being as you earn at 2.96%, the gross p.a. rate, and they don't pay any interest on balances over £20K...which you'll exceed as soon as they add the first month's interest), so need to use 2.96% as your baseline.


EDIT: But to show you the maths...

((£20,000 x 0.03) - (12 x £2)) x 100 = ...£576....... x 100 = 2.88%

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£20,000..............................................£20,000

innovate

ah yes. of course, YB, we need to use the gross rate. So do we agree on 2.84% if we cannot eliminate the £24?

20,000 * 2.96% = 592
Minus 24 is 568
568/20000*100 = 2.84%
Roughly 2.27% after basic rate tax

macman

matttye wrote: »

I think it would make more sense to put £2.5k in a Nationwide FlexDirect account (5% interest) and £17.5k in a Santander account.

Not a big difference but an increased rate of interest nonetheless.

It would make sense to fill an account with a higher rate of interest but smaller cap before an account with a lower rate of interest but higher cap.

Correct, but again this requires £1K monthly to fund it, rather than £500. On balance I think S123 is pretty decent given the £20,000 cap. Which (sadly) covers my requirements.

cfw1994

thx to Innovate for spotting it is E.ON on the 1-2-3 list !

Also now wondering whether to switch away from our Reward account to 1-2-3 for the bill DD's, but Nationwide FlexDirect for the insurance/breakdown benefits.

Oooh, decisions decisions.....

cheers!

matttye

macman wrote: »

Correct, but again this requires £1K monthly to fund it, rather than £500. On balance I think S123 is pretty decent given the £20,000 cap. Which (sadly) covers my requirements.

It's worth noting that the deposit doesn't have to stay in the account each month. You can do this:

27/03/13: Nationwide account - balance - £2,500
28/03/13: Get paid
01/04/13:
Deposit £1,000 into Nationwide account - new balance £3,500.
Move £1,000 from Nationwide account into Santander 123 account - new Nationwide balance - £2,500.

That satisfies the monthly deposit criteria for both accounts using only £1,000 in total and you will get the 5% interest on the Nationwide account and the respective tier of interest for the Santander account.

It is a very good account though, no doubt about it!

macman

If you reduce the 3% S123 interest rate by factoring in the £2 monthly fee, then surely you also have to factor in the effective gain you get from the cashbacks? I have set up the minimum 2 DD's on mine, and get approx £3 per month, which more than covers the monthly fee.

Hominu

innovate wrote: »

20,000 * 2.96% = 592
Minus 24 is 568
568/20000*100 = 2.84%
Roughly 2.27% after basic rate tax

The £24 comes out the net rate though, not the gross rate, so you can't factor it in like that, but for the purpose, it's close enough. 2.84% is much closer than 2.88%.

macman wrote: »

If you reduce the 3% S123 interest rate by factoring in the £2 monthly fee, then surely you also have to factor in the effective gain you get from the cashbacks?

In that case your not using it as a pure savings account, but a current account, so would indeed need to feed those into the equation as well.