Using current account for Savings

mjdavies4

I have a Santander ISA that pays 2% and the Santander 123 account which pays 3% over £3k. I am thinking of moving the £7k I have in the ISA to this account I also save £500 per month. Eventhough I will have to pay tax on the interest I am wondering if this is better than keeping it in the ISA. The 123 account pays interest monthly and the ISA annually. Any tips would be appreciated.

Thanks

Rafter

mjd,

I would be cautious about losing your ISA allowance just for a short term gain. There is no way that Santander can afford to pay 3% on a current account long term.

You should be able to earn a bit more than 2% by moving your ISA elsewhere. 3% on the 123 account is 2.4% after 20% tax or 1.8% if you are a higher rate tax payer so you are talking £24 in interest over 12 months.

R.

grizzly1911

The 123 account charges £2.per month which will reduce the income from interest earned unless you have some chunky DDRs going through it.

[STRIKE]As you point out the 3% rate only applies to the top slice of £17k. Up to £1k nothing, £1k -£2k 1% and 2% between £2-3k. On £10k (your 7k plus half of your annual saving amount) interest would effectively be £240, 2.4% before tax and [/STRIKE]

possibly £24 charges.

If it is used as a principal current account discipline will be required not to touch the "savings" and it is a lot of cash that could be subject to fraud if your details got into the wrong hands (using a debit card in lots of places).

You loose the ISA allowance from prior years.

Edit:-

My interpretation was wrong.:o

eskbanker

grizzly1911 wrote: »

As you point out the 3% rate only applies to the top slice of £17k. Up to £1k nothing, £1k -£2k 1% and 2% between £2-3k.

No, once your balance is over £3K, you get 3% on the entire balance, not just the top slice, their website confirms this....

grizzly1911

eskbanker wrote: »

No, once your balance is over £3K, you get 3% on the entire balance, not just the top slice, their website confirms this....

From their website and accords with previous threads here.

"Interest - on your current account balance:

• 1.00% AER/gross (variable) on balances from £1,000
  
• 2.00% AER/1.98% gross (variable) on balances from £2,000
  
• 3.00% AER/2.96% gross (variable) on balances from £3,000 and up to a maximum of £20,000."

This bit refers to interest being payable once you have over £1k up to £20k max.

"Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account."


http://www.santander.co.uk/csgs/Satellite?appID=abbey.internet.Abbeycom&canal=CABBEYCOM&cid=1237892266671&empr=Abbeycom&launch=NO&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_ViewSelector


More than happy if this interpretation is incorrect.

helptoyou

grizzly1911 wrote: »

From their website and accords with previous threads here.

"Interest - on your current account balance:

• 1.00% AER/gross (variable) on balances from £1,000
  
• 2.00% AER/1.98% gross (variable) on balances from £2,000
  
• 3.00% AER/2.96% gross (variable) on balances from £3,000 and up to a maximum of £20,000."

This bit refers to interest being payable once you have over £1k up to £20k max.

"Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account."


http://www.santander.co.uk/csgs/Satellite?appID=abbey.internet.Abbeycom&canal=CABBEYCOM&cid=1237892266671&empr=Abbeycom&launch=NO&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_ViewSelector


More than happy if this interpretation is incorrect.

Hi Your interpretation is incorrect see below.


Interest

1.00% AER/gross (variable) on your entire balance, once your balance is £1,000 or over. 2.00% AER/1.98% gross (variable) on your entire balance, once your balance is £2,000 or over. 3.00% AER/2.96% gross (variable) on your entire balance, once your balance is £3,000 or over (up to a maximum of £20,000). Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account. AER stands for Annual Equivalent Rate and shows what the interest rate would be if we paid interest and added it to your account each year. The gross rate is the interest rate we pay before income tax is taken off. Rates may change, we calculate interest daily and we pay interest each month.

grizzly1911

helptoyou wrote: »

Hi Your interpretation is incorrect see below.


Interest

1.00% AER/gross (variable) on your entire balance, once your balance is £1,000 or over. 2.00% AER/1.98% gross (variable) on your entire balance, once your balance is £2,000 or over. 3.00% AER/2.96% gross (variable) on your entire balance, once your balance is £3,000 or over (up to a maximum of £20,000). Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account. AER stands for Annual Equivalent Rate and shows what the interest rate would be if we paid interest and added it to your account each year. The gross rate is the interest rate we pay before income tax is taken off. Rates may change, we calculate interest daily and we pay interest each month.

Thanks.

Can I ask where that detail is taken from?

I will check this months calculation as it will have had the full £20k for the whole period.

Ifts

grizzly1911 - Also stated here:

3.00% AER/2.96% gross (variable) on your entire balance once your balance is £3,000 or over (up to a maximum of £20,000)

http://www.santander.co.uk/csgs/StaticBS?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1223428158824&cachecontrol=immediate&ssbinary=true&maxage=3600 (p3 - Interest rates and Cashback)

eskbanker

It's undoubtedly true that Santander do use slightly different versions of the relevant text but http://www.santander-products.co.uk/banking/media/123.html is another one quoting the 'entire balance' interest rate section at the bottom.

Hominu

Rafter wrote: »

There is no way that Santander can afford to pay 3% on a current account long term.

Oh I'm sure they can afford to, its just a question of how long they want to do it, and the more savings accounts that go down the toilet, the more people who'll think about opening current accounts which have decent interest rates, so the more customers they get, but most will not just use it as a savings accounts as there's a £24 annual fee and a requirement of 2 DDs, so they'll switch accounts - possible extra income from additional products, etc.

pqrdef

Ifts wrote: »

3.00% AER/2.96% gross (variable) on your entire balance once your balance is £3,000 or over (up to a maximum of £20,000)

Which on the face of it still seems to be saying that you don't get the 3% if your balance is above £20,000. Which of course is quite wrong.

To interpret it as intended, you have to understand that when they say entire, in bold print, they don't actually mean entire.

But it's quite simple

Balance £1000-1999.99 - interest 1% on whole balance
Balance £2000-2999.99 - interest 2% on whole balance
Balance £3000+ - interest 3% on first £20,000, niothing on excess over £20,000.

Would it not be possible for banks to employ somebody who can describe their products accurately in the English language? Of course they'd have to get a contractor in, because their own staff are so used to the stream of Bankspeak coming out of head office that they can no longer say anything money-related in any other language.