TSB : How does it work?

FireWyrm

OK, probably a really stupid question but I am trying to figure out if TSB would be a good fit.

Some brief background. I have been with HSBC for ages and I think I want to switch. I am looking for a new current account which will handle income and bills. The account is not for spending as such since I do piggy banking. I have all my SOs set up so that they go to other banks where I can actually spend the money on whatever the pot is allocated for. The transactions are income and DDs/SOs only.

TSB say that they pay (roughly) 5% on balances in their current account. Lovely. However, I cant figure out how much I am likely to get and therefore, whether it makes better sense than say a Halifax account which pays me £100 in the first year for switching and a further £60 just for having it.

When is the interest calculated? On the balance every day? On the balance on a given date? When? Since I get paid on the last working day of the month and my DD/SOs go out on the 1st of the month, if TSB pay on the last day of the month, then there will be a big balance, but if they pay an accumulation of daily...that isnt so good, because after the 5th of the month, all money has been allocated and there is just a basic running cushion of a few hundred in there.

Is it simply better to go with the guaranteed income of £60 per year from Halifax (plus the initial switch bonus) or dig in for the longer term with TSB and build a large cushion? I just cant make up my mind.

Or is there another alternative that is better than either of those two?

Archi_Bald

Interest on all accounts that pay interest (current, savings) is calculated daily, on the balance in the account at the end of the day. That "end" is anything between 6pm and 12pm, depending on when the bank runs their end of day processing.

So if you have £2,000 in your TSB account at the end of each day all year long, you get £2,000 * 4.89% * 0.8 = £78.24.

4.89% is the gross interest rate which you need to use in this case since there is no compounding of interest. 20% of the gross interest gets automatically withheld by the bank.

To me, it isn't a question of "TSB or Halifax" - - - I have both. The monthly £5 at Halifax aren't enough reason for me to keep more than the £2 needed for the 2 monthly DDs in there. Any cash I have lives in interest-paying current accounts.

If you don't ever have any balance to speak of, keeping it in an interest paying account would obviously be a rather moot point. Although judging from some of your other posts, you seem to have anything up to £15K in cash, so accounts like the TSB Plus (of which you are allowed 2) are pretty much a no-brainer. Alongside the Halifax Reward.

FireWyrm

Thanks Archi

The 15K is a buffer and is being accrued elsewhere, it is being saved via one of those SO's I spoke about.

What I'm looking for is somewhere to park my primary siphon account. At the moment, it is sitting with HSBC who pay foxtrot oscar in interest and I want to rectify this. Halifax pay a standard interest (effectively) of £60 a year which appears to be non-taxed. This primary siphon account has a single purpose in life, which is to receive money and pay bills or any standing orders. For most of the month, it will sit with very little (relatively) in it since most of the money is allocated to savings and investments elsewhere.

On balance, given that there is likely to be only a nominal float of £300 in there at any one time for most of the year, the annual interest on that would be sub-£20. Obviously, getting paid by Halifax £60 a year is vastly better. I'm not actually looking to make big returns on this right now, just some return would be a bonus and pay for my kindle book fetish for instance.

The savings and investments side of things is a whole other ball game and you have given me much to think about when it comes to doing something with that. Ideally, eventually, every spare penny in every account or investment ought to be earning me something, but I am still missing bits of the puzzle. This is the first step - moving my primary income account somewhere that pays something.

YorkshireBoy

FireWyrm wrote: »

Halifax pay a standard interest (effectively) of £60 a year which appears to be non-taxed.

It's already taxed when you get it. The 'real' Reward is £6.25 but they automatically deduct tax. Non-tax payers need to complete an R40 to get the extra £1.25 (per month) at the end of the tax year.

Sounds like TSB Plus would be a waste of time for you, with only a £300 float!

FireWyrm

YorkshireBoy wrote: »

It's already taxed when you get it. The 'real' Reward is £6.25 but they automatically deduct tax. Non-tax payers need to complete an R40 to get the extra £1.25 (per month) at the end of the tax year.

Wow, that's interesting. So, if someone where to give money to a non-working member of the family, then they would get the £6.25 bonus per month instead?

YorkshireBoy wrote: »

Sounds like TSB Plus would be a waste of time for you, with only a £300 float!

Well, obviously, I would like to increase that float to be truly YNAB compliant, but at the moment, it would stay at around £300 until Christmas. The worm turns next year and things really start to happen in January. I'm just trying to get a plan sorted that makes maximum use of every penny. If the Halifax offer a fixed payment of £5 a month, then that comfortably pays for my little jollies. I think I'll reserve TSB for later on as perhaps a place to park a SHTF fund and leave it relatively static while investing the larger sums in more rigid investments that are not so easy to get to but pay higher interest.

eskbanker

Archi_Bald wrote: »

If you don't ever have any balance to speak of, keeping it in an interest paying account would obviously be a rather mute point.

It would actually be a moot point, as per the likes of http://www.reference.com/motif/health/mute-point-vs-moot-point!

Mr_Goodkat

FireWyrm wrote: »

Thanks Archi

The 15K is a buffer and is being accrued elsewhere, it is being saved via one of those SO's I spoke about.

What I'm looking for is somewhere to park my primary siphon account. At the moment, it is sitting with HSBC who pay foxtrot oscar in interest and I want to rectify this. Halifax pay a standard interest (effectively) of £60 a year which appears to be non-taxed. This primary siphon account has a single purpose in life, which is to receive money and pay bills or any standing orders. For most of the month, it will sit with very little (relatively) in it since most of the money is allocated to savings and investments elsewhere.

On balance, given that there is likely to be only a nominal float of £300 in there at any one time for most of the year, the annual interest on that would be sub-£20. Obviously, getting paid by Halifax £60 a year is vastly better. I'm not actually looking to make big returns on this right now, just some return would be a bonus and pay for my kindle book fetish for instance.

The savings and investments side of things is a whole other ball game and you have given me much to think about when it comes to doing something with that. Ideally, eventually, every spare penny in every account or investment ought to be earning me something, but I am still missing bits of the puzzle. This is the first step - moving my primary income account somewhere that pays something.

You have £15k of savings but current debt of over 11k according to your signature, why???


Unless you have all of that at 0% you are likely to be paying more in interest on the debt than you receive in interest on your savings and even if all or most of that £11k is on 0% cards you have no doubt paid handling fees of up to 4% again negating any interest gains?


Halifax fivers rather than TSB would be better for you given the relative low balance of the account.

FireWyrm

Mr_Goodkat wrote: »

You have £15k of savings but current debt of over 11k according to your signature, why???

I dont have current savings of that much. That figure came from an entirely different conversation regarding heavy investments rather than simple savings. Also, I dont have debts of that much. I havnt updated my signature in a while. Dont worry, I know what I am doing. Thank you for your concern anyway.

Mr_Goodkat wrote: »

Unless you have all of that at 0% you are likely to be paying more in interest on the debt than you receive in interest on your savings and even if all or most of that £11k is on 0% cards you have no doubt paid handling fees of up to 4% again negating any interest gains?

Not an issue. I have all debts on zero percent. I have just paid (today) £1000 off them. Suffice it to say, when that debt is gone, there will be significant amounts of money to play with. The conversations regarding savings were around what to do with that money when it is available which will be shortly, at this rate.

I was asking a specific question about a parking place for an account with a single purpose. That account receives all income and divvies up all outgoings. It is effectively, my clearing account. HSBC pay jack-s**t in interest, but Halifax do pay. I wanted to move the clearing account somewhere a little more sensible.

Mr_Goodkat wrote: »

Halifax fivers rather than TSB would be better for you given the relative low balance of the account.

Yes, thank you. I eventually came to the same conclusion. However, I was having trouble working out what I might get from TSB because of the large amounts of money flowing through it rather than sitting in it passively.

And...I have just had a letter from Natwest this morning which says that my savings piggy bank(s) (for categorised spending, food, clothes, glasses, you get the idea) with them which were earning a slightly less measly 1%, are now earning half that...so, that clinches it. I'm off to TSB with all that money too (over £1000 a month) and putting that in TSB and running categories through YNAB instead of actual accounts. I knew I should have listened to Archi last month when he told me to do the same thing.

PPS...before you say it...yes I know I was an idiot for the last two decades. I could have been doing much better with what we had. The current plan has evolved over the last year and what was working for me before (different accounts) doesnt make sense in light of the advent of current accounts which pay decent interest.