Payment of interest on savings accounts

Just thought I'd raise this as I'm not sure it's been raised anywhere else. When subscribing to a new apparently attractive savings account, check where the interest (normally paid monthly) is being paid. The Nationwide BS is a major culprit here, offering an attractive interest rate on an instant access account, but will only pay the interest into a linked current account. Given the time it takes to transfer the funds back into the account, you will have lost several days interest, thereby offsetting the benefit of holding money in the savings account in the first place.

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  • evenasusevenasus Forumite
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    Faster payments by most banks transfer within the hour.
    The time for saving for a house deposit, is before you marry/live together/have children.
    Save for what you want to buy
    .

    You're - You are
    Your - It's yours.
  • jimjamesjimjames Forumite
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    Just thought I'd raise this as I'm not sure it's been raised anywhere else. When subscribing to a new apparently attractive savings account, check where the interest (normally paid monthly) is being paid. The Nationwide BS is a major culprit here, offering an attractive interest rate on an instant access account, but will only pay the interest into a linked current account. Given the time it takes to transfer the funds back into the account, you will have lost several days interest, thereby offsetting the benefit of holding money in the savings account in the first place.

    Not sure if you've actually tried it but transfers between accounts are instant so no interest will actually be lost? Unless you have millions in your account the interest on the interest over a day or two is going to be insignificant anyway.

    £100,000 @ 3% = £3000 pa interest = £8 per day
    Interest on £8 x 3% = 24p per year

    I didnt have enough decimal places to show it per day - but it isn't a penny.

    NW actually pays on of the best rates on its current account so paying into that may not be a hardship anyway.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • innovateinnovate
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    Which of the Nationwide accounts did you have in mind? The MysafePlus? It's the only one I know of from the Nationwide range that pays interest into a "linked" account.

    With internal transfers and/or faster payment, you can easily minimise transfer times to hours if not seconds. Also, if you are interested in accrued interest, why not opt for the annual interest payment instead of the monthly one?
  • Thanks to innovate, but the last time I looked I was informed that there were no fast-track payments between My Save Online Plus and the FlexAccount that I have held with the Nationwide for 30 years. I'll look it again to see if things have changed. Similarly transfers back the other way take three days. For this reason--even as a seasoned Nationwide customer--I have seldom availed myself of their savings products.

    And thanks also to JimJames--as a professional macroeconomist I hadn't thought of doing such complicated mathematics.
  • rb10rb10 Forumite
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    Thanks to innovate, but the last time I looked I was informed that there were no fast-track payments between My Save Online Plus and the FlexAccount that I have held with the Nationwide for 30 years. I'll look it again to see if things have changed. Similarly transfers back the other way take three days. For this reason--even as a seasoned Nationwide customer--I have seldom availed myself of their savings products.

    The days of 3-working-day transfers are long gone.

    Transfers into your MySave will go through on the same day, provided you make the transfer before 1pm.

    Transfers out should arrive in your FlexAccount the day after you made the request.

    (Transfers between any other Nationwide savings accounts are instant, it's only MySave that's different).
  • GromittGromitt Forumite
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    Thanks to innovate, but the last time I looked I was informed that there were no fast-track payments between My Save Online Plus and the FlexAccount that I have held with the Nationwide for 30 years.

    If you have had a FlexAccount for 30 odd years, then did you open a Loyalty Saver? Last year the interest was 2.6%. Its now 2.1% (changed last month) and transfers take seconds.

    If you didn't open a Loyalty Saver last year, you can do so now, the only consequence will be that you'll have to apply for Issue 4, which means 1.7%, but still better than the MySave by a mile.
    And thanks also to JimJames--as a professional macroeconomist I hadn't thought of doing such complicated mathematics.

    I can only assume you are being sarcastic here? As those kind of mathematics are taught at secondary school ?
  • edited 30 October 2013 at 9:07PM
    jimjamesjimjames Forumite
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    edited 30 October 2013 at 9:07PM

    And thanks also to JimJames--as a professional macroeconomist I hadn't thought of doing such complicated mathematics.

    Happy to help. I try to lay out calculations simply so anyone can understand though I assume you are joking. But if you are a professional macroeconomist why did you think the interest lost was such a big issue? Unfortunately it doesn't inspire much confidence in economists either that you didn't do the calculation or thought it was an issue if you did.
    you will have lost several days interest, thereby offsetting the benefit of holding money in the savings account in the first place.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • alanqalanq Forumite
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    rb10 wrote: »
    The days of 3-working-day transfers are long gone.

    You'd have thought so but recently it took 3 days for the funds from a maturing Derbyshire Building Society (a Nationwide brand) fixed term account to reach my Nationwide FlexDirect account despite my instructions being sent well in advance.
  • edited 31 October 2013 at 6:30AM
    bowlhead99bowlhead99 Forumite
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    edited 31 October 2013 at 6:30AM
    I should caveat this by saying I haven't done an economics exam for over 15 years but... :)
    jimjames wrote: »
    £100,000 @ 3% = £3000 pa interest = £8 per day
    Interest on £8 x 3% = 24p per year

    I didnt have enough decimal places to show it per day - but it isn't a penny.
    I try to lay out calculations simply so anyone can understand
    The maths is accurate in terms of each eight pounds in your account earning 24p per year. Which is only a penny a fortnight and not too much to worry about. However, "it isn't a penny" is a misleading conclusion. Why are you trying to analyse how much you earn (or fail to earn) by having or not having eight pounds in the 3% account?

    The eight pounds is what you earn on the £100k every DAY. But nobody pays daily interest of £8 to your current account and expects you to manually shuffle it back to the savings account on a daily basis. So you will never be in a situation of only having eight pounds in the 'wrong' account.

    You'll either:
    - get annual interest, in which case one day of the year you'll suddenly have £3000 in the wrong account which costs you a pound of lost interest for every four days that you fail to notice and move it back; or

    - get monthly interest, in which case one day every month you'll suddenly have £250 in the wrong account and are missng out on 2p a day interest ; and if you take four days to action it that's 8p and if that happens every month, that's a pound, like the annual example.

    I appreciate a pound is not a big deal if you have 100k of them but, as they say, "look after the pounds and the 100ks look after themselves". :D

    And yes, to any pedants, I know that if you take the monthly-paying option on a 3% AER account, you'll only get £246.60 monthly not £250; the point is the same - it's an annoyance, and we are not talking about a tiny fraction of a penny if it takes you a day to fix, we're talking about 24p if it takes you a day to fix and possibly a pound or two if you're not at your PC for a few days. Obviously if you are smart about it you can set up standing orders to help fix the situation, but if you don't maintain the exact same amount of cash in the savings account every day of the year, or different months have different numbers of days and thus different payouts, you will not get the standing order bang on.
    NW actually pays on of the best rates on its current account so paying into that may not be a hardship anyway.
    True, NW have good rates but there are some issues:

    Their top account pays 5% but
    - this is a promo rate for your first year after which it goes down to 1%;

    - they only pay on the first £2500 and if you are trying to make the most out of it you'll be aiming to maintain a balance within a few pounds or tens or hundreds of that level (depending on how actively you can be bothered playing the game) and so suddenly receiving £3k into it (or even £250) means you might not get any interest at all on the savings interest receipt, unless your planning is more complex than the average joe public.

    Their other cuurent account has a lower rate (3% rather than 5%) which is not a promo rate dropping after a year, more of a long term rate. But they can afford it because they have the same £2500 cap on what they pay out on, and you have to pay them £120 a year to run the account (to get some perks and £60 interest after basic rate tax assuming your account was at its max every single day of the year); so as with the first account, receiving a large interest receipt from another account might not be massively helpful if you were already at or near the max level.

    To the OP, I agree the cash going into a linked account rather than being auto-reinvested is something that can cost you a few days returns on the returns - it's the same issue investors have with shares or investment trusts or funds that pay out dividends requiring manual reinvestment - some people like it because they actually want the cash income to spend or reinvest elsewhere, while some don't.

    But for me the reason it costs a few days is because I'm not watching the current account like a hawk to know it's arrived, rather than the bank being unable to kick the cash back into my savings account the same day I instruct them.
  • jimjamesjimjames Forumite
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    bowlhead99 wrote: »
    I should caveat this by saying I haven't done an economics exam for over 15 years but... :)

    The maths is accurate in terms of each eight pounds in your account earning 24p per year. Which is only a penny a fortnight and not too much to worry about. However, "it isn't a penny" is a misleading conclusion. Why are you trying to analyse how much you earn (or fail to earn) by having or not having eight pounds in the 3% account?

    I did wonder afterwards if anyone would pick up that it was based on a day rather than a month. The simple calculation was obviously too simple but it did show how it could be done and the numbers are still small at 24p.

    I agree about the pennies adding up but I think there are probably better things to be able to do to get a higher return like using a Halifax reward account to cycle money through to get £60 per year rather than the quid.
    Remember the saying: if it looks too good to be true it almost certainly is.
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