more interest on my 123 current account than my isa??

leono1

ive got a santander direct isa saver (Pays 1.00% AER tax free (variable) for balances from £1)
and ive got a santander 123 current account ( 3% AER (variable) interest on balances from £3,000 and up to a maximum of £20,000)

would i earn more interest on my money if i moved my isa money to my current account (as this would take my current account amount over £3000)? thanks in advance

tried post links to santandeers website but not allowed

droopsnoot

Yes you would, depending of course on what the exact amounts involved are, as you only get the higher rate on the amount above £3000, not the whole balance of the account. So the final balance above the £3000 threshold must be at least 33% more than your total ISA balance for it to help.

Be careful about doing that, though, as once you've taken the money out of the cash ISA it loses it's "tax free" status and the only way to get that back is to put it back, subject to the annual limits. That might not matter to you, and the actual figures might work better, but that's the key thing to remember: once that status has gone, it's gone.

opinions4u

You would earn more interest with Santander for now.

But their 3% rate is unsustainable in the longer term. I doubt they'll be able to retain the rate beyond 2014.

Once you move it out of an ISA it loses its tax-free status.

leono1

ok thanks for the replies. i did not know that the 3% was only on the amount of money over £3000 i though it was on the whole amount.

i understand it would lose its tax free status but i thought that the increase in interest would still make me better off in my current account (if the 3% was on my whole current account balance)
the amount in my isa that im thinking of moving over is below 5000 so at a later date i could re invest all this back in an isa anyway couldnt i?

Freecall

opinions4u wrote: »

But their 3% rate is unsustainable in the longer term.

I don't see why not.

Clearly nothing is forever but it must not be forgotten that this is not related to the bank's cost of borrowing (they can get cash much cheaper elsewhere and certainly don't need our few quid to keep them solvent).

This is a marketing cost to increase their customer base and judging by the number of new account holders they claim to have gained is probably very cost effective.

Many banks will pay to get additional customers for the opportunity it gives them to forward sell other products, just look at the deals on offer from others.

We happen to be living through a period of low interest rates and the market is very rate conscious which means that 'special' interest rates are seen as attractive. When rates return to normal you can expect offers to go back to 'get a free silver pen' or whatever but until then interest rates are the way to win new business and 3% of the average balance is probably pretty cheap.

bsms1147

leono1 wrote: »

ok thanks for the replies. i did not know that the 3% was only on the amount of money over £3000 i though it was on the whole amount.

It's on the whole amount.

jimjames

leono1 wrote: »

i understand it would lose its tax free status but i thought that the increase in interest would still make me better off in my current account (if the 3% was on my whole current account balance)
the amount in my isa that im thinking of moving over is below 5000 so at a later date i could re invest all this back in an isa anyway couldnt i?

Yes you can move it back in again in future if it is below £5000. If you have paid any in this year then you would be limited but after April you'd be able to pay the whole amount back in if you needed.

If you are looking for the best rate then Nationwide offer 5% on their current account for balances to £2500.

YorkshireBoy

opinions4u wrote: »

But their 3% rate is unsustainable in the longer term. I doubt they'll be able to retain the rate beyond 2014.

I can't see them dropping the rate, whilst ever BoS, Lloyds, TSB, YB/CB, and Nationwide are paying the same or better.


However, I do see them cutting the £20K to something similar to the others, ie £5K...or maybe £10K.


Time will tell.

Archi_Bald

YorkshireBoy wrote: »

However, I do see them cutting the £20K to something similar to the others, ie £5K...or maybe £10K.

That, if they do indeed take the lead from others, would most likely amount to a max reduction to £15K because they know that we know that we can have 3 x £5K.

Unless they all act in concert, I reckon there is close to zero chance for Santander to drop their top interest rate. Remember also, they charge £2/mth which none of the others do.

Ifts

leono1 wrote: »

i did not know that the 3% was only on the amount of money over £3000 i though it was on the whole amount.

If you have £3k or over in the 123 current account then its 3% on the whole amount up to £20K.

Interest rate

You must have at least £1,000 in your account.

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)

http://www.santander.co.uk/csgs/StaticBS?ssbinary=true&blobkey=id&SSURIsscontext=Satellite+Server&blobcol=urldata&blobheadervalue1=application%2Fpdf&blobwhere=1314013410373&SSURIsession=false&blobheadervalue2=inline%3Bfilename%3D484%5C51%5Cbank0455.pdf&SSURIapptype=BlobServer&blobtable=MungoBlobs&SSURIcontainer=Default&blobheadername1=content-type&blobheadername2=Content-Disposition#satellitefragment&maxage=3600 (page 3)

YorkshireBoy

Archi_Bald wrote: »

That, if they do indeed take the lead from others, would most likely amount to a max reduction to £15K because they know that we know that we can have 3 x £5K.

They also know they can give whatever rate on £30K, using your example of maximising the number of accounts you can have.

Unless they all act in concert, I reckon there is close to zero chance for Santander to drop their top interest rate. Remember also, they charge £2/mth which none of the others do.

Which is why I speculated they may pitch at £10K (or maybe higher at your £15K figure), so as to allow for the fee (to 'help' those not maximising the cashback on DDs).


They'd still be able to differentiate themselves from the competition then.