How to maximise one's salary

DLC2013

Hi everyone,

I earn just below £1000 a month. I have 20k savings and have just opened a Santander 123 account.

My question however is how practical is it to open say a Lloyds vantage account (3% interest on savings up to 5k) pay my salary into the 123 account and then transfer this into the Lloyds account, so as to benefit from both? (Making up the small difference through additional savings)

I appreciate i would only earn around £150 a year (Similar to Nationwide's Flexdirect perhaps) but as per the title of the thread i am looking to maximize my earning capability, be it £150 it is still better than nothing.

I have heard of this idea discussed previously (i.e opening 4 x Lloyds accounts @ 3% interest with 5k each as opposed to 1 x Santander 123 account, so as to avoid the £2 fee) but i just wondered if anyone has any advice or has a similar set up in place currently.

I must point out i do also have a cash ISA (3 years at 3% with Halifax and intend to top it up again in April)

Savings accounts seem to offer paltry interest rates

Thank you for your help

bigadaj

Yes that's fine, why not do the flexdirect or possibly Clydesdale or Yorkshire at 4%?

You can of course get cashback on direct debits on the Santander accounts which can defray the fee or even get into profit.

DLC2013

Well actually i don't have any direct debits that require guaranteed payments each month. I set up a Barclaycard & Paypal Direct Debit to satisfy the requirement, but i scarcely use either.

I suppose the Lloyds Vantage is the second best option to the Santander 123 account to maximise interest earning potential at 3% on savings up to £5,000.

My question however is for how long would i need to keep the initial salary in the 123 account before transferring it?

I am also slightly skeptical as to whether some of these interest rate offers are sustainable beyond the end of this year perhaps.

Thanks for your help!

organic_wanabe

DH and I have 3 Santander 123 accounts between us, each containing around £20k. On 2 of the accounts our £500 credit (in lieu of salary) goes in and often comes out on the same day. We still get the interest.

Archi_Bald

DLC2013 wrote: »

I suppose the Lloyds Vantage is the second best option to the Santander 123 account to maximise interest earning potential at 3% on savings up to £5,000.

Given you don't have DDs that qualify for cashback, you would actually do better with accounts that pay a straight 3%, without any monthly fee. I.e. Lloyds Vantages, TSB Enhances, BoS Vantages (you can have 3 of each).

DLC2013 wrote: »

pay my salary into the 123 account and then transfer this into the Lloyds account, so as to benefit from both?

as you don't have DDs that qualify for 123 cashback, what did you have in mind in terms of benefiting from both, the 123 and the Vantage?

DLC2013 wrote: »

cash ISA (3 years at 3% with Halifax and intend to top it up again in April)

are you sure that you can make further deposits into this ISA?

F1F93

DLC2013 wrote: »

My question however is for how long would i need to keep the initial salary in the 123 account before transferring it?

No time at all. I have a standing order set up on my 123 account/NW Flex direct so that the money goes from one account to the other and then back again on the same day.

They only count money going in, not coming out. So as long as the total money coming in over the course of the month is greater than a thousand pounds. Even if you withdraw more than this.

organic_wanabe

I only have to pay £500 each month into our Santander accounts. Have they now upped it to £1,000 per month for newer accounts?

YorkshireBoy

organic_wanabe wrote: »

I only have to pay £500 each month into our Santander accounts. Have they now upped it to £1,000 per month for newer accounts?

No. The driver in that case is the £1K requirement by Nationwide, which is then sent back to replenish the 1-2-3 account.

DLC2013

Archi_Bald wrote: »

Given you don't have DDs that qualify for cashback, you would actually do better with accounts that pay a straight 3%, without any monthly fee. I.e. Lloyds Vantages, TSB Enhances, BoS Vantages (you can have 3 of each).

as you don't have DDs that qualify for 123 cashback, what did you have in mind in terms of benefiting from both, the 123 and the Vantage?

are you sure that you can make further deposits into this ISA?

Yes i had considered 3 accounts, but I'm not sure how practical it is to do this since they may reduce the interest rate in due course.

I don't gain any cash back rewards from the 123 account, i am merely using the account to claim from their generous 2.96% interest offer on 20k

And finally regarding the ISA, yes i can deposit the full allowance into the existing ISA come April.

Interesting thoughts though, thanks everyone

innovate

DLC2013 wrote: »

And finally regarding the ISA, yes i can deposit the full allowance into the existing ISA come

Fixed term Halifax ISAs only allow deposits in the first 60 days after opening.

innovate

DLC2013 wrote: »

Yes i had considered 3 accounts, but I'm not sure how practical it is to do this since they may reduce the interest rate in due course.

I don't gain any cash back rewards from the 123 account, i am merely using the account to claim from their generous 2.96% interest offer on 20k

There is no guarantee that Santander won't be dropping their interest rate, either.

As you do not get any cashback from the 123, your effective interest rate is well below the 2.96% gross. On £20K, you won't be getting £592 per year but only £568. I'll leave it to you to work out the effective interest rate.

With multiple Lloyds etc accounts, you can achieve a full 3% AER since you will be able to compound interest.

You might not care about the £24 but you started out saying you wanted to maximise your salary.

If you really did want to maximise, you would also consider a Nationwide FlexDirect, a Halifax Reward, and one or two regular savings accounts.

I am a big fan of the 123 and have got several myself but it is not the best interest paying account for everybody.