NISA vs Santander Current Acc

xirokx

Hey,

I have 10k I for the past few years have been moving from ISA to ISA.

I need to move it ASAP as the interest on my current ISA has downgraded to 0.25%

So I have been looking around at saw the Santander 123 account offering 3% and the Post Office or BMI offering 1.55%.

I do not know which one to go for.

I am 34years old, single, mature student, I earn around £1k after tax

I can save £200 per month until Aug 2015.

My mind tells me to go for Santander 123 account, I have at least 2 direct debits coming out of my account etc

My current account is with Natwest, they give me a 4k overdraft which if I dip into costs me £6 per month (not sure how good / bad that is ?? )

I do not foresee me dipping into the 10k saving for at least another 2.5 - 3years.

I thought about keeping my natwest account and depositing my salary into the Santander 123 account and then transferring it back to my Natwest Account every month. What do you think about this? Is there a minimum period the £500 has to be in the account?

Also how is the 3% interest paid? If I keep the £10k in the santander account for 12mths do I get the interest monthly or annual? If monthly, how does it work out monthly?


The reason why I thought of the NISA with the postoffice or BMI was purely because after 1 year I can take the interest and run and it wouldnt involve moving money around each month. Although as you know the interest is less.

So What would you recommend?

Thanks in advance

colsten

You shouldn't, under any circumstances, use your overdraft if you have savings. The overdraft costs you a lot more than the interest you can earn with savings.

For the amount of money you have, forget ISAs until they pay more interest than current accounts. With a little bit of imagination and work, you can make a lot more than in the Santander 123, even though it is a nice account. But don't forget, it costs £2/mth, so that comes off the interest you could earn.

You can do better if you put e.g. 2 x £1,800 in 5% TSB Plus accounts, 1 x £2,300 in Nationwide FlexDirect (1 year only), 1 x £4,100 in 4% Club Lloyds. The amounts mentioned mean you wouldn't need to skim off the interest on a monthly basis, so just initial set up is required. The minimum payments can got in and out on the same day by SO. The Club Lloyds needs 2 DDs which you can easily set up with Tesco savings accounts. There are threads on all of these accounts on here.

One proviso - you need to have a decent credit history if you want to apply for current accounts.

Eco_Miser

There's no minimum period for the £500 to be in the account; you could even take £500 out then put it back again same day.

You could keep your Nat West account, though I can't see the point of using an overdraft if you've got £10k+ on instant access.

Interest is calculated daily and paid monthly.

If NISA interest rates get competitive, you can put up to £15k in, in a tax year, so there's no point in keeping your money in an ISA until that happens.

However, for slightly more messing about, you can get 5% AER on £6500, plus 4% on £5000 plus the opportunity to save £25 to £400 per month at 4%, using TSB, Nationwide, and current Lloyds accounts. http://www.moneysavingexpert.com/savings/savings-loophole

xirokx

You can do better if you put e.g. 2 x £1,800 in 5% TSB Plus accounts, 1 x £2,300 in Nationwide FlexDirect (1 year only), 1 x £4,100 in 4% Club Lloyds. The amounts mentioned mean you wouldn't need to skim off the interest on a monthly basis, so just initial set up is required. The minimum payments can got in and out on the same day by SO. The Club Lloyds needs 2 DDs which you can easily set up with Tesco savings accounts. There are threads on all of these accounts on here.

Thats handy advice.....credit history is pretty sound.

How frequently do these accounts pay interest? Or is it paid annually?

You say just initial setup is required? How do I do this? Please advise...Thank you

What happens if any of the accounts you recommended drops their interest rate dramatically? I would need to keep an eye on this wouldnt I?

Sure the Satanander 123 is a nice account and yes it has a £2 monthly fee, which means I would lose £24 from £300 gained for minimum work and effort? compared to your suggestion which sounds good in theory but depends on how much interest it actually pays VS setup and moving funds around?

However, for slightly more messing about, you can get 5% AER on £6500, plus 4% on £5000 plus the opportunity to save £25 to £400 per month at 4%, using TSB, Nationwide, and current Lloyds accounts. http://www.moneysavingexpert.com/sav...vings-loophole

same question to you.....how much interest does this equate to for 10k?

thanks for your ideas so far

Stubod

....whatever you do..do not touch the post office with a bargepole...they are utterly crap...the worst customer service I have ever experienced..would rather get "no interest than use the post office..they are truly clueless....I speak from very bitter experience....

....have used Santander, and all seems good so far, despite earlier problems ...at least they seem to learn from previous problems.....

mgdavid

xirokx wrote: »

.........

Sure the Satanander 123 is a nice account and yes it has a £2 monthly fee, which means I would lose £24 from £300 gained for minimum work and effort?.......

you get between 1% and 3% cashback for certain classifications of DD with Santander. One of mine is the local council tax, the cashback covers the £2 monthly charge.

xirokx

thanks for your responses....

If I could just suss how to do this:

You can do better if you put e.g. 2 x £1,800 in 5% TSB Plus accounts, 1 x £2,300 in Nationwide FlexDirect (1 year only), 1 x £4,100 in 4% Club Lloyds. The amounts mentioned mean you wouldn't need to skim off the interest on a monthly basis, so just initial set up is required. The minimum payments can got in and out on the same day by SO. The Club Lloyds needs 2 DDs which you can easily set up with Tesco savings accounts. There are threads on all of these accounts on here.

and confirm its not too much bother doing it then I believe it returns nearly £500 interest on 10k...

Any ideas?

Thanks

YorkshireBoy

xirokx wrote: »

Sure the Satanander 123 is a nice account and yes it has a £2 monthly fee, which means I would lose £24 from £300 gained for minimum work and effort? compared to your suggestion which sounds good in theory but depends on how much interest it actually pays VS setup and moving funds around?

The £300 is a gross figure. Are you a tax payer?

colsten's suggested set up would generate £459 gross interest...a £183 increase on Santander (a little less if you have qualifying cashback DDs on Santander).

colsten

xirokx wrote: »

How frequently do these accounts pay interest? Or is it paid annually?

monthly

xirokx wrote: »

You say just initial setup is required? How do I do this? Please advise...Thank you

well, uou obviously need to apply for the accounts, get online access working, put money into them, set up SOs for the monthly min payment, and set up 2 Tesco savings account for the DDs needed. As I said, there are threads on all these accounts, perhaps browse through them

xirokx wrote: »

What happens if any of the accounts you recommended drops their interest rate dramatically? I would need to keep an eye on this wouldnt I?

Banks will tell you but it is always a good idea to keep your eyes on interest rates

xirokx wrote: »

compared to your suggestion which sounds good in theory but depends on how much interest it actually pays VS setup and moving funds around?

moving funds around is a doddle really with SOs. Swap £500 between the two TSBs. Swap £1,500 between your Lloyds and your FlexDirect.


With the distribution I suggested you will make £459 before tax, versus the £276 (£300 - £24) before tax you can make in the 123. That is 66% more.


If I were you, I would also consider switching my Natwest account to a Halifax Reward. They pay you £100 for it, and then you get £5 every month you stay in credit, pay in £750 and pay out 2 DDs. That's another £60 a year.

Before leaving Natwest, I would open another current account with them, for the single purpose of starting a series of switching. Coop pay £100, M&S £125 in vouchers, First Direct £100 or £125.

So from switching and using Halifax, you could make another £485 (tax free) in the next 12 months, and there might just be some other account switching offers, so keep a donor account at the end of your switching.

A little bit of work is involved in all this - and you must understand what it is you need to do as nobody can spoonfeed you.

YorkshireBoy

colsten wrote: »

you will make £459 before tax


So from switching and using Halifax, you could make another £485 (tax free) in the next 12 months.

So OP, from a position of earning 0.25% on your cash, you're looking at the thick end of a 10% return on your cash over the next 12 months...for something you can do in your spare time, from the comfort of your settee!

Eco_Miser

xirokx wrote: »

same question to you.....how much interest does this equate to for 10k?

thanks for your ideas so far

It would depend on how you distributed the £10k between the accounts. Colsten's arrangement seems as good as most.

However you really need to learn how to work out the approximate interest for yourself, given an AER and starting amount.