Using A current account as a savings account

Archi_Bald

Mr_Goodkat wrote: »

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.

This is an excellent example for when a cash ISA can make sense, and there are a few more of the forumites with similar circumstances. They are still the exception though, and most of the lucky ones with a glut of cash that isn't needed in the short term will go for investments such as S&S ISAs and SIPPs.

hostertlady

Mr_Goodkat wrote: »

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.

30 + current accounts.... eeekkkkk

Archi_Bald

hostertlady wrote: »

30 + current accounts.... eeekkkkk

Better than 1 ISA, for most people.

St00bies

Hi guys,

Thanks for all the advice, I was thinking my banking could get complicated but looks to be nothing on Mr Goodcat! Guess we all need to start somewhere and I am only just getting back to a position where I am saving some cash and obviously want to make the most of it. With this new advice I can crack out excel and crunch the numbers to see which option gives best yeild

Cheers again,

St00bies

jenfa

Gosh Hostertlady I bow down to you. In the last couple of months I have upgraded one Lloyds vantage to Club Lloyds and opened single 123 a/c and upgraded joint Santander to 123 too, oh and closed another vantage a/c. I think I am organised but sorting out which dd were going where and making sure I traced the money from one account to another took a bit of time.

You do need to keep an eye on when your money goes over the limit set by the banks as you won't receive interest until it is lowered .

My husband is a high rate tax payer and he has kept some of his money in ISAs as he has about £30,000, however the money we used to put away into an ISA for our roof repair fund I am keeping in the 123 a/c. We have worked out even with the joint a/c paying 40% on his half and 0% on mine (after self assessment) we still get 2.4% which is higher than most isas! The tesco savings account is getting stripped out too!

St00bies

Hi Archi and all other contributors,

Firstly just to thank you for all your help with this, it is really great to find such a passionate community and people like yourself who take the time to help people like me to come up the learning curve!

I have opened up two TSB accounts and upgraded to the Club Lloyds account. If my workings out below are correct I will open the halifax account too but dont want to do that unless I am right in my thinking!

Just trying to work out the best way to shift money around to meet all the criteria for the banks and don't know if you have any recommendations?

I currently earn over £1500 PCM after deductions and as I see it can move the money in the following way:

Club Lloyds - Takes salary payment and has all existing DD's set up (4 in total) meeting the £1500 cash in/out criteria. I can set up a regular standing order to leave this account for £750. Keep two DDs in Club Lloyds and move two to Halifax reward (explained later)

TSB 1 - registered for internet banking and paperless statements and will transfer £2k over shortly

TSB 2 - registered for internet banking and paperless statements and will transfer £2k over shortly

Halifax Reward - Move Balance of ISA and Slush fund (approx 1k) to this account

Thoughts on moving the cash around each month are:

1) Move the £750 I pay in standing orders to TSB 1 on the first of each month

2) Move £750 from TSB 1 to TSB 2 on the second.

3) Move £750 from TSB 2 to Halifax Reward on the 3rd.

4) Then on the 4th move £335 from Halifax Reward back to Club Lloyds

Thus saving and depositing £350 with Halifax instead of the existing ISA and slush fund. Move the two Direct Debits (£40 and £25 respectively) to Halifax Reward also.

Hopefully this approach meets all the cash in/out criteria and maximises interest across accounts. Plan is then to skim interest at the end of the month in to Halifax to accumulate further there.

Next task will be to find a good Credit Card and get cash days with the Club Lloyds current account clearing balance in full each month, but taking one step at a time for now!

As this is my first attempt at being clever with the banks I just wanted to confirm with someone more experienced that what I am doing makes sense and as far as you are aware meets the criteria!?

I really appreciate all the help!

Thanks,

St00bies

Archi_Bald

Nice to see someone else can see the merits of the current account game. The setup looks largely fine to me, well done! Just 2 improvement suggestions

1. don't faff about with "real" DDs for Halifax. It is good enough to set up two small custom DDs, using a couple of Tesco savings accounts
2. don't leave lots of money in the Halifax Reward. All you need in there is a couple of quid for the two DDs. The rest of the money should be transient - in and out on the same day. My balance with them has never been more than £1 at the end of each day.

Also, don't get too hung up about earning £1,500 for Lloyds. You could meet the Lloyds deposit requirements by depositing the same £750 twice, for instance, or the same £500 three times.

St00bies

Hi Archi,

Do you know where I could find a bit more information on the Tesco savings account stuff? Is there a reason Tesco is best?

Thanks,

Stu

Archi_Bald

Very easy - go to http://www.tescobank.com/savings/, open 1 Internet Saver and 1 Instant Access Savings account. Or just one of these should do, too.

Once set up, and once you have your online access, you then just set the accounts up to pull a pound or so each month from the current accounts that need a DD. Tesco will process these money pulls as DDs.

I can't remember now how long it takes to set up internet access with them but waiting for this to be ready is probably the most challenging bit of the whole process.

As an aside, Tesco do a nice 3% AER current account now - useful for when your others are full, lol.

butterflymum

St00bies wrote: »

TSB 1 - registered for internet banking and paperless statements and will transfer £2k over shortly

TSB 2 - registered for internet banking and paperless statements and will transfer £2k over shortly
St00bies

Do also ensure that you've opted-in to paperless correspondence as well as paperless statements (as they are two separate options, but both are required for interest to be earned).