Using A current account as a savings account

St00bies

Hi Guys,

I have been doing my research having like many realised my bank is not currently working very hard for my custom.

I believe I currently have a pretty "typical" banking set up:

Lloyds Classic Current Account: Used as a typical Current Account

Quick Access Savings account: Pay £250 a month in to this as a slush fund and try to maintain a £1000 balance which I currently earn no interest on but gets me out of jail quick if the car/laptop/phone breaks etc.

ISA 0.5% Interest: Balance of £4500 in this ISA

What I am considering... and I don't know it is within the rules is to....

Current Account 1: Club Lloyds Current Account - Transfer ISA Balance to this account and have my salary paid in to this account to get 4% on my balance - Move the saved cash to a nISA in March before end of tax year.

Current Account 2: First Direct (£125 sign up and 6% linked savings up to £300 per month) - Transfer my salary from Current Account 1 to Current Account 2 and use Current Account 2 as my regular banking service. Benefiting from the 6% linked saver depositing the full £300 per month.

Thoughts are to split direct debits between the two accounts though if I could have them all coming out of one it would be easier!

Slush Fund: Use existing Low interest rate Lloyds saver

ISA: When it comes to March, find best deal for me...

Anyone with thoughts on what I am planning to do and whether I could even legitimately do this would be greatly appreciated!

Kind regards

St00bies

Archi_Bald

You got the right idea there, and you could even go one better if you added

1. 2 TSB Plus accounts (use as savings accounts, or may be use one of them as your proper current account)
2. 1 Halifax Reward account (use to collect £5 a month)
3. 2 Tesco savings accounts (use for the DDs required)

into the mix.

There are threads on this on the forum.

With £4,500 for your ISA, there is really no point in having an ISA no or next March. As the allowance is £15,000, you can put money into an ISA at a much later date.

Mr_Goodkat

Think there are better options than those you have identified above starting with getting rid of ISA and maximising high interest current accounts.


TSB PLUS x 2 will give 5% on £2000 and you can have two of them, the only requirement is £500 funding per month which you can set up a standing order between the two, you then only need to skim off the interest from the account on a monthly basis.


You need to remember that with the First Direct that whilst the regular saver at 6% is great the current account pays 0% interest so any money sitting there is earning nothing. FD for 6% saver and 0% on £250 OD is great but that's about it....


Halifax will give you £100 for switching and as long as you find with £750 per month and pay out two direct debits you will earn £5 per month from them.


If you have sizeable qualifying direct debits (especially a Santander mortgage) then Santander 123 account is very useful even at £2 per month


Forgot the low interest saver slush fund just have a current account for that purpose e.g TSB Plus.


As Archi has suggested set up Tesco savings accounts to meet DD requirements.


Also look at Cash back paying Credit Cards if you don't have one e.g Amex Every Day Platinum will give you 5% cash back on your first £2000 spent in three months = £100. Put all your spending on a cash back card so it earns you money and the 56 days interest free (provided you always settle in full) gives your money time to earn interest in a current account.


Good luck

agrinnall

Archi_Bald wrote: »

As the allowance is £15,000, you can put money into an ISA at a much later date.

You can, but you have to watch out for closing dates on some of the better ones - the Coventry 2.75% Fixed has a top up window that is only open for certain during July (although they may opt to keep it open longer).

For the OP keeping £4K in a 0.5% ISA is a complete waste, either find a better ISA and transfer it now or close it and use one of the current account options.

Archi_Bald

agrinnall wrote: »

You can, but you have to watch out for closing dates on some of the better ones - the Coventry 2.75% Fixed has a top up window that is only open for certain during July (although they may opt to keep it open longer).

fixing for 4 years at 2.75% when you can get 4% after BR tax on instant access does not strike me as a clever move.

agrinnall wrote: »

For the OP keeping £4K in a 0.5% ISA is a complete waste, either find a better ISA and transfer it now or close it and use one of the current account options.

With £4.5K ISA funds, any ISA is presently, and probably for the next year or two, totally irrelevant. For reasons given above, and because the allowance is £15K.

AFK_Matrix

There is also the FlexDirect current account from Nationwide Building Society. There is no limit to the number of accounts you can have.

I currently have:

Lloyds Club account - 4% on £5000
Nationwide FlexDirect - 5% on £2500
TSB - 5% on £2000
123 Santander - Variable % but I am getting the 3% at the mo

As for the fact these accounts say you need to have X amount of money going into the account, I use my main 123 Santander account to transfer the amount to the other accounts and then just intantly have a transfer back from the accounts to the Santander account so I don't have to tie up my money in those accounts.

Archi_Bald

AFK_Matrix wrote: »

There is also the FlexDirect current account from Nationwide Building Society. There is no limit to the number of accounts you can have.

You only get the 5% introductory interest on 1 of them though.

hostertlady

just reading this thread...


doesn't anybody recommend having money in cash ISA's anymore? I know the rates are rubbish, but isn't it better to have the biggest amount of your savings in a cash ISA?


(before you ask, yes, I have got some classic plus accounts set up )

Archi_Bald

Of course there are people who have money in cash ISAs. Some for good reasons, some because they don't know/understand there are better ways to earn interest, grow your money or earn income, and - sadly - some who follow an ill-conceived "must have a cash ISA regardless" mantra like lemmings.

The vast majority of savers are basic rate tax payers and it will take them several years to save £15,000. The average market value of cash ISAs according to the latest published statistics is £7,620, and some 48% of all cash ISAs contain less than £3,000. Only 16% of cash ISA holders have more than £15,000 in their cash ISAs.

So at least 48% of all cash ISA savers - but probably a lot more - gain absolutely nothing from having a cash ISA, and would do miles better with a couple of TSB Plus accounts.

AFK_Matrix

Archi_Bald wrote: »

You only get the 5% introductory interest on 1 of them though.

Sorry didn't word that very well I meant that there is no limit to the number of different current accounts you can have from different banks!

Mr_Goodkat

hostertlady wrote: »

just reading this thread...


doesn't anybody recommend having money in cash ISA's anymore? I know the rates are rubbish, but isn't it better to have the biggest amount of your savings in a cash ISA?


(before you ask, yes, I have got some classic plus accounts set up )

It all depends on circumstances but at the current rates of ISAs and Current Accounts most basic rate tax payers would be better holding their savings in high interest paying current accounts rather than ISAs.


ISAs are good because it is tax free and once in a tax free wrapper it stays that way but the rates are not great. There was always an argument not to take money out of a tax free wrapper but now that annual maximums are up to £15k taking money out is less of a risk as most people would be able to get their money into a ISA wrapper should the high interest rate current accounts disappear in the coming years.


I have moved my Vantage money to my FD ISA today but that's because I will get 2% tax free rather than 1.5% before tax on that money as a higher rate tax payer it makes sense. I am only doing this because with 30+ current accounts I have nowhere else to go to get a high interest paying current account.