Bit of savings advice?

theronkinator

Sorry for the long post.


Read a lot of the stuff on here, I *think* the best option is to switch to First Direct and get the £125 switch bonus and get their regular savings account at 6%.


Currently I have everything with Halifax.
Cardcash account - £20
Reward Current Account (pays £5 a month) - £5000
Student Current Account - £1000
ISA (at 1.5%) - £9000
Halifax Clarity Credit Card - Used for foreign currency purchases, zero balance.


Ideally I'd like to keep my reward current account. I don't earn a huge amount, but could save £300-500 a month. Currently I loop £1000 between the reward and student account to get the £5 a month. So I could keep the £1000 looping between the Reward and the First Direct account.


So my plan Is migrate the Student or Cardcash account to First Direct for the bonus. Direct debits I only have my phone bill and paypal, what's an easy way to create two more so I can have two on each account to satisfy the T&Cs?


Then I pay £300 a month into the First Direct savings account at 6%.


What about the ISA, bar the nationwide one at 2.3%, my Halifax at 1.5% seems alright, should I stick with this, the First Direct one is only 1.3% so worse, and I don't really want to be split between 3 banks.


Thanks.

jimjames

You can get 5% on £6500 with other current accounts at tsb and nationwide which beats your ISA rates. An ISA is pointless for small amounts when better rates elsewhere after tax.

theronkinator

Couldn't see either of those accounts, just £3000 limits, anyone else want to way in.

colsten

theronkinator wrote: »

Couldn't see either of those accounts, just £3000 limits, anyone else want to way in.

Did you not look hard enough? What £3,000 limits are you referring to?

There are also threads on all the interest paying current account on the MSE Forum.

bowlhead99

theronkinator wrote: »

Couldn't see either of those accounts, just £3000 limits, anyone else want to way in.

http://www.nationwide.co.uk/products/current-accounts/flexdirect/features-and-benefits is 5% on 2.5k

http://www.tsb.co.uk/current_accounts/classic_and_classic_plus_accounts.asp is 5% on 2k, and you are allowed two accounts

So, combine them and you have 5% on a total of 6.5k, that is what jimjames was talking about. The purpose was to show that there is a huge gulf between what you can get on current accounts (5% less tax is 4%) and what you are getting on your ISA (1.5% no tax). So it does not make sense to keep the ISA.

His example was just to show the big difference in net interest available from the absolute best accounts you don't have, and what you've chosen to have. As you have £9k and not just £6.5k t, you'd need another account - perhaps Lloyds who would give you 4% (3.2% after tax) on a balance of between £4 and £5k. After tax, that's still double what you're getting on your Halifax ISA.

As you mentioned you don't want to be split between lots of banks, you probably don't want to replace one ISA with a Nationwide, two TSBs and a Lloyds. But blended together, that would almost triple the interest you're earning from your ISA on £9-10k though, so it would be worth over £200 a year. To some people, that wouldn't be worth the hassle of setting up the accounts and standing orders and direct debits to meet the terms and conditions. To others, it would.

If you wanted a similar effect with fewer banks involved, the Santander 123 current account pays 3% on up to £20k which at 2.4% net is still better than the 1.5% on your Halifax ISA, with lots of headroom for more than 10k of further savings before you hit the limit on what they'll pay interest on. A return of that level (2.4% after tax) gives you 60% more interest than you're getting at Halifax.

So, that's why people say don't use ISAs for small amounts. The ISA limit is £15k per tax year so you can easily move the money to an ISA later if the rates get better and you need the tax protection.

In terms of ideas for direct debits there are posts on this all the time (mine last week referenced a much bigger one by Innovate). Some banks will let you set up direct debits from their savings accounts to pull money over from your other current accounts; if not you could make small charitable donations or buy things online with paypal fed by direct debit etc.