High interest bank accounts

The_stingemeister

Wonder what the implications of so many people switching their money to them are, say, 18 months or more down the line. I'm dead against paying for banking, but the Santander 123 (you pay a fee) does seem attractive. Especially when you already have another bank account with them, so the minimum Direct Debits are set up ready.
You can't help feeling that this is a way of phasing out "free" banking, you leave your original account and then you find that account is closed to you if you want to go back. In the future you could imagine these 3-5% interest rates sliding back down (just like the bonus rates on savings accounts). But all the free bank accounts will have been closed down by then. Also does anyone feel uneasy at having large sums in a bank account, (as opposed to being shut away in a savings or ISA account) for example £20,000 in the Santander 123?

saver861

Well its possible the rates will change or be withdrawn at some point. Nationwide do 5% but only for the first year - then it automatically drops to 1%.

While it is there I'm taking advantage of it while always looking for better options. I still have my main account with my original bank however. I have other accounts for the switching processes so I just switch from an account that is not important.

The free bank accounts can become chargeable at any point also - the fact someone keeps one open does not mean it will stay free so I'm not seeing your logic there.

Herbalus

Not sure what you mean? I think those that have several of these bank accounts are not the norm, so won't be a pivotal factor in Britain's current account market.

Plus, Santander is the only one with a high interest current account that charges an unavoidable fee.

If and when the rates are reduced, people will move to whatever is best. That's all we can do. Remember that the recent swathes of 4% and 5% are newer than the 3% accounts, so I don't see the end any time soon.

Archi_Bald

The_stingemeister wrote: »

Wonder what the implications of so many people switching their money to them are, say, 18 months or more down the line.

why worry? you won't be able to change it yourself anyway so you might as well benefit from the existing offers until then - or until anything changes.

The_stingemeister wrote: »

Especially when you already have another bank account with them, so the minimum Direct Debits are set up ready.

DDs are per account, not per bank. So even if you open another account with the same bank, you would need to get the DDs moved

The_stingemeister wrote: »

You can't help feeling that this is a way of phasing out "free" banking, you leave your original account and then you find that account is closed to you if you want to go back.

I don't see the connection. But if you are fretting, just keep your existing account(s) - nobody forces you to give them up just because you want to open one or more additional current accounts.

The_stingemeister wrote: »

In the future you could imagine these 3-5% interest rates sliding back down (just like the bonus rates on savings accounts).

They are variable rates so they can change at any time, and on some accounts they have indeed come down (Vantage, Enhance). But why not benefit from them until the interest rate goes lower than you can get elsewhere?

The_stingemeister wrote: »

But all the free bank accounts will have been closed down by then.

you can always go for a basic account if the last free current account has been taken out of your reach. However, a monthly charge on an account doesn't necessarily mean it is any worse than an account with no monthly charge. The Santander 123, for instance, is a way better financial deal than any free current account you could name, simply because most people get actually paid to have the account.

The_stingemeister wrote: »

Also does anyone feel uneasy at having large sums in a bank account, (as opposed to being shut away in a savings or ISA account) for example £20,000 in the Santander 123?

I don't feel uneasy, and I have oodles of these accounts. As long as I am taking security as serious as I should take it, I don't need to worry.

If you are concerned, you can use a different account for your everyday use from the one(s) you keep your savings in.

Herbalus wrote: »

Plus, Santander is the only one with a high interest current account that charges an unavoidable fee.

True yet it is generally very easy to make a lot more than £2 a month from DD cashback - something no other bank has been offering to date.