ISA or 123 account?

rory_GB

Right,

I have just opened a Santander 123 current account, not to be used as my main one (I have first direct for that), I opened it with the intention of using it to get cash back on my bills etc.
There terms state that they pay current interest at a rate of 3% on balances between 3-20k. I have 3.5k in my isa but the rate is only 0.5% (haven’t done anything with is this year) haven’t seen many cash Isa’s that interest me….now I have 2 options.

1. Get a new Santander cash isa (for 123 customers only that allows transfers and get 2.1%) does this apply as I already have my money in a Santander isa (from 2012/13) – didn’t think you could transfer in the same bank?

2. Chuck the lump some in my current account get 3% gross paid monthly and forsake its isa status?

Answers on a postcode please. I am also open to other options, I don’t wanna tie the cash down to a fixed rate as I may spend it if needed, but while I have no plans to use it I would like to make the most of it

Cheers

eskbanker

The 2.1% Santander 123 cash ISA that you refer to is a 2 year fixed term product, so you're committed to keeping the funds there for 2 years or closing it entirely with the loss of 120 days interest (which would obviously leave you with approx 1.4% net interest rather than 2.1%).

The 123 current account gives you a higher net interest rate at roughly 2.4% but you sacrifice the tax-free status in return for that, so it's probably a better option unless you plan on building up a tax-free pot at the full annual ISA limit for a number of years.

rory_GB

eskbanker wrote: »

The 123 current account gives you a higher net interest rate at roughly 2.4% but you sacrifice the tax-free status in return for that, so it's probably a better option unless you plan on building up a tax-free pot at the full annual ISA limit for a number of years.

this was my thought, is the 123 offer a limited one, i.e. only next 12 months, if so the money might be better staying as in isa so its avaible for next years allowance, short term returns on the 123 account might be good though, with the current rate i will get approx £20 interest in a year

at least with the current account it will net about £10 interest (less tax) a month if i transfer my isa and keep £500 as cash to pay bills etc

:T

dzug1

The 123 current account is an indefinite offer AFAIK - that doesn't mean it will never change though

rory_GB

so can i assume the 123 account pays interest on the whole amount, as long as its over £3000, or just the bit over £3000.....this is unclear?

eskbanker

rory_GB wrote: »

so can i assume the 123 account pays interest on the whole amount, as long as its over £3000, or just the bit over £3000.....this is unclear?

It's payable on the whole amount once the balance is over £3,000, although there seem to be fewer references to 'the entire balance' than there used to be in the product literature! However, in the detailed Ts & Cs, it does still clearly state:

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)

rory_GB

ok thanks

have moved it into my 123 account, to accrue 3% interest

wll move the max amount back before 6th april 2014, and make the most of the isa next year.