I am new to banking - please help me figure out some basics. Anyone with club lloyds?

Smith27

Hi everyone, i am still young and opened my first account (lloyds classic account) with my first job last october and am looking for some non-complicated advice.

I am earning above £1,500 a month at the moment so from what i understand i could go to club lloyds and get 4% AER / 3.93% gross but i don't know really what this means.

Has anyone here gone with club lloyds and would you recommend it. Is it totally free, and can i go back to a classic account whenever i want? I'd assume if i do the interest etc would stop, but how do the "lifestyle benifits" work.

Thanks everyone!

20aday

Hello there,

Have a gander at the product page here: http://www.lloydsbank.com/current-accounts/club-lloyds.asp

To earn interest on your balance you need to pay two separate Direct Debits each month; the interest rate you quote is based on a balance of £4-5,000.

I believe it's possible to downgrade to a Classic Account in branch but you would lose the interest and other account benefits (cinema tickets etc).

xylophone

https://www.lloydsbank.com/current-accounts/club-lloyds.asp

explains the tiered rates of interest, the monthly pay in, the DD requirement and the lifestyle benefit.

However, unless you are going to keep the maximum in the account and know that you can meet the requirements, there are other accounts that you might consider and that might suit you better.

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts

[Deleted User]

Club Lloyds is a viable option for you.

You've said that you earn over the £1,500 threshold so you can sustain the account for free rather than paying the £5 monthly charge.

4% AER / 3.93% gross means the interest you will gain per year on the balance of your account between £4000 - £5000. As most people will probably be on standard income tax 20%, you will be getting 3.14% net tax on your balance within the amounts stated. If you have any less, you will gain less interest on your balance, for example 2% AER / 1.98% gross on £2000-£3999.99.

The benefits include 6 free cinema tickets a year, a magazine subscription or a gourmet society membership.

You can switch back to the classic account whenever you like with no charge.

I would however advise you to open a TSB account first so you can fill it up with £2000 and gain 5% gross interest, 4% net interest. A TSB account only requires you to pay in £500 a month but you can just move it out again once you've done this.

Ballard

With regards to the interest, if you kept £1,000 in your account for the whole month you'd earn interest at 1% which would be about 80p per month.

Smith27

Thanks everyone. To work out interest is it

5000*0.04/12

So if i have >5k in my account i earn £16 a month?

I didn't know you have to do 2 DD. Currenty i pay my phone on contract for £15pm. I have no other DD, could i set one up to my parents and would this count? Is there a minimum payment/length on the DD pm?

Katiehound

Your other DD might be with a Tesco savings a/c. Really easy to set up and can be for just a couple of £s per month.
With Club Lloyds the DDs need to go out every month for you to earn interest- they must be active, not just 'set up.'

Remember that from the new tax year interest will be paid gross, not deducted by the banks and you will be able to 'earn' £1k interest without paying tax
Interest - yes about £16 per month assuming the £5k is there for the whole month.

As already suggested the TSB Classic Plus is a neat little earner- 5% on £2K and no DDs required. Just £500 needed to 'cycle ' round!!
You could do both and gradually build your holding in the Lloyds, or you could also open a monthly regular saver with Club Lloyds which pays 4%

YorkshireBoy

Smith27 wrote: »

Thanks everyone. To work out interest is it

5000*0.04/12

So if i have >5k in my account i earn £16 a month?

Each day you earn interest at...

Closing balance x 3.93% / 365

If you have a static balance of £5K throughout a billing month of 31 days you'll receive...

£5,000 x 3.93% / 365 x 31 = £16.69 gross.

You may or may not pay tax on this.

I didn't know you have to do 2 DD.

Now might be a good time to read up on the product on their website.

Currenty i pay my phone on contract for £15pm. I have no other DD, could i set one up to my parents and would this count?

No. How about a charity?...a savings account (only a few accept deposits by DD)?

Is there a minimum payment/length on the DD pm?

Not usually, but if you're using a charity don't take the mick!

Ballard

Why do you calculate on the AER and not the headline rate? Surely the account accrues at 4% and not 3.93. I have never investigated the difference but I thought that the AER is lower because the bank hold the accrued interest until it has been applied.

As someone who has worked in banks for donkey's years I should probably know but in my defence I've never worked in a retail bank.

YorkshireBoy

Ballard wrote: »

Why do you calculate on the AER and not the headline rate? Surely the account accrues at 4% and not 3.93. I have never investigated the difference but I thought that the AER is lower because the bank hold the accrued interest until it has been applied.

If that question is being asked of me I didn't use the AER (of 4%)...I used the gross p.a rate (of 3.93%).

Interest is always calculated based on gross p.a. rates rather then AER, which is a notional figure based on what you'd get if the interest was paid and compounded once per year. To illustrate this, just check out the AER and gross p.a. rates for a savings account that pays interest annually, and you'll see they're the same, unlike monthly paying accounts (such as the one being discussed here) where the gross p.a rate is almost* always less than the AER.

If you fill a Club Lloyds account with £5K it's impossible to earn the AER, since no interest is paid on the first month's interest that tipped you over £5K.


* The exception being accounts with an introductory bonus lasting less than a year.

Ballard

Thanks YB. It was aimed at you (I find it too tricky to quote as I'm typing on my phone).

I see now. The AER is 4% and the gross 3.93%. The compounding of the interest makes the AER higher.

Thanks for pointing it out to me.