Chasing Top Rates and credit checks

WineDarkSea

I've just opened a handful of accounts to distribute cash from a couple of lousy ISAs we have. I have already filled my 123 account plus cash back DDs but am trying to get the better rates and avoid the second account fees now it's £5 a month.

I have
Nationwide @5% with £2,500
Bank of Scotland @3% with £5,000

And am awaiting online activation codes for
TSB @5% with £2,000
Club Lloyds @4% with £5,000

I have a few £k left so tried to open a second Bank of Scotland Vantage account but was rejected. Have I dented my credit rating after these account openings or is it because it's two accounts with one bank and my income isn't high enough for both?

I don't actually work (home with kids but this may change soon) so no income but I hold the savings to use my tax allowance, husband is higher rate tax payer so would take a big hit and the interest is well over the new PSA of £500 for him.

Should I lay off the new account opening for a while or is it worth attempting to get the Tesco account for the 3% on the remaining cash? Or is a regular saver a better option in the long run?

YorkshireBoy

WineDarkSea wrote: »

I have a few £k left

Depending on what "a few £K" is, you can get £1,100 a month into regular savers with account providers you already have/will have shortly, ie TSB, Lloyds, and Nationwide.

But, rather than chase (and be rejected for) 3% accounts, why isn't your higher rate tax paying husband also opening the 5% accounts at TSB & Nationwide? For him they'll pay the same 3% after tax...and also get him access to their 5% regular savers. Furthermore, each of those will let you have, between you, a third account which will be joint.

WineDarkSea

He's not opening them because he'll get taxed on the interest at the moment, but his £500 PSA come April will cover a few of the higher rate accounts with lower maximum deposits, especially if joint as I presume tax is shared so we can earn another £1,000 in joint accounts before he's taxed - I haven't confirmed this is definitely the case with the PSA.

He's also rubbish at managing his accounts and finding better rates. Asking for his input would be nagging as its 'boring' but he's very happy for me to maximise interest this way.

I'd like to save £10k pa, it's more like £8k now, so the amount will go up fairly quickly, that's why I've avoided this method in the past and gone with the 123. We have £330 saved automatically every month (and about the same again on average from the main account) so a regular saver will be a good option. I do worry the rates will suddenly be pulled and we will have a large sum with a lack of good options. Although we will have enough to pay off the mortgage in 4.5 yrs at this rate.

I'm also impatient!

Katiehound

Club Lloyds also has the monthly regular saver with a max pm of £400 paying 4%

Both HSBC & M&S (and possibly 1st Direct?) have monthly regular savers- max £250 pm paying 6%. Awkward conditions with M&S- you need to have switched current a/c and have 2 x active DDs and I think fund £1k pm. (Can't remember exactly which were conditions for the gift voucher!!)
HSBC needs current a/c funded with £1750 pm but no DDs. I have £1K doing one circuit, £500 doing a different round and an inpayment of £250 which goes straight to the savings a/c!!

Maybe I'm making a silly comment here.
Because mortgage rates are so much better than savings rates isn't it always recommended to pay off the mortgage as soon as poss rather than build savings? (unless there are early payment penalties.)

bigadaj

Katie - not sure about your last comment as you say it might be silly and it is a bit.

Many peoples mortgage rate is lower than savings rates you can get on current accounts. In thsi case it makes little sense to pay off the mortgage as you are making money from the money the bank has lent, what is known as an old fashioned Arbitrage.

This isn't a never pay the mortgage down comment, it is purely down to the actual rates that exist which is very much a personal and individual thing. Many people like the idea of removing that debt even when it is not strictly the best or most efficient thing to do.

Katiehound

bigadaj wrote: »

This isn't a never pay the mortgage down comment, it is purely down to the actual rates that exist which is very much a personal and individual thing. Many people like the idea of removing that debt even when it is not strictly the best or most efficient thing to do.

Not in that position myself- only quoting what Martin says plus a friend had a pension pay up and she was advised to pay off the mortgage as there was no way the low savings rate on the capital sum would equal the high mortgage rate- so she paid it off!

Eco_Miser

WineDarkSea wrote: »

I don't actually work (home with kids but this may change soon) so no income but I hold the savings to use my tax allowance, husband is higher rate tax payer so would take a big hit and the interest is well over the new PSA of £500 for him.

Just checking, you know as a non- or low-earner your tax allowances add to £15,600 this year and £17,000 next?

bigadaj

Katiehound wrote: »

Not in that position myself- only quoting what Martin says plus a friend had a pension pay up and she was advised to pay off the mortgage as there was no way the low savings rate on the capital sum would equal the high mortgage rate- so she paid it off!

Just a comparison of the rates and sums involved if we're being purely objective.

Many people may have mortgages with rates at 2% below, when a couple can put away in excess of £100k at 3-6% then that's some good money to be made at little or no risk.

Further up the risk scale then people on such rates would put money into investments, this will be volatile and more risky but long term investment returns at say 4% over inflation would still leave a good chance of making money on the deal.

WineDarkSea

Our mortgage is only 2.49% so much better to save right now. We can save the mortgage amount faster than paying it off, using the various calculators available. But having money available is also worth a lot as its much harder to borrow now. We may build an extension with kitchen bathroom and other improvements so better to have money in the bank than have to rely on the bank to lend us our money back. Shame as they were throwing money at us when we looked into moving in 2012 but we'd never get 4x income now.

WineDarkSea

Can anyone advise of the timing of the transfers out of the accounts? I presume interest calculations mean it's best to have the max amount as log as possible so the quicker the better. As all accounts would be topped to the max this should be fine and risk no over draft and I'll start off with the account with the most money and lowest interest. So is it possible to arrange this to all happen on one day?

And if I'm patient and credit checks go well (should do for husband anyway) I could open three nationwide, three TSB, two Club Lloyds, one Bank of Scotland and keep my 123 but with much less in the latter. The interest will be around £1,430 a year with husband liable for £450ish and just under £1,000 in my name so both under the respect PSA limits for when I'm back to work (hopefully in September). There will be a lot of transfers to arrange!

TartanSaver

If you do it manually, you can do them all in one sitting with faster payments. Some banks will treat standing orders falling on weekends or holidays different from other banks, which can create problems. If, however, the accounts will all be "full" (to the interest paying limit, anyway) then there's no risk of being overdrawn, so worst case scenario you lose a couple of days interest if you set them all for the same day with standing orders. The bigger issue with this is that interest earned will vary monthly, depending on the day it is paid and the length of the month, which is why I find it easier to do it manually - otherwise you effectively don't benefit from compounding until you withdraw the interest. Or, if you try to account for interest with the standing order, your standing order sometimes takes out a little too much and the balance goes down marginally over time. I find I can cycle all of mine in about 20 minutes. Worth checking them monthly anyway, to make sure you've not been a fraud victim!