Any savings accounts that better current accounts?

derrick

redpete wrote: »

As a qualified pedant I need to point out that you actually wrote

krazyk wrote: »

I can't find any ISA, savings account or regular saver accounts that compete.

my emphasis.


And from the same post he also said:

krazyk wrote: »

I also should be able to afford to put at least £500 a month of my salary away on top of this (possibly up to £700pm).

.

LXdaddy

Let's not beat the OP up too much. He has now "seen the light".


krazyk - in relation to which account you take money from to feed into the Regular savings accounts (if it is not "new money") the obvious point is to take money from the account paying the lowest interest rate to feed into the higher paying regular savers. So its better to reduce the balance in a 3% account to add to a 6% regular saver account than to reduce a 4% or a 5% account.


And of course that advantage is not just for a year - because when the regular saver account matures you put the balance into the highest paying current account that you have available and then start another regular saver.


In some ways it is better to stagger the maturity dates of the Regular savers so the lump sums don't all become available at the same time and you don't have to find a home for ALL the money in the same month.

krazyk

redpete,

Thus I didn't say I was putting into a regular saver account. Confused. Anyway, the thread has moved on a few posts back since then. Any tips from post #15 onwards?

krazyk

derrick,

See reply to redpete.

krazyk

LXdaddy,

Yep, that's what was cleared up for me when I created my spreadsheet. I just needed to visualise it. :-) So, for example, move from the 3% Santander 123 current account to the 5% Nationwide Regular Saver account etc.

I've so far got 1 x Santander 123, 1 x BOS, 1 x TSB, 1 x Club Lloyds, 1 x Tesco Bank and I've also got a Halifax Help to Buy ISA. So I've got 2 x BOS and 1 x Tesco Bank to go. Blimey!

I can transfer regularly from Santander 123 then the other 3% current accounts to the Nationwide Regular Saver and the Lloyds Regular Saver.

I think this will keep me busy for a while. I'll see how this goes before jumping into more and getting a HSBC ands First Direct Regular Saver accounts as both these need current accounts but don't seem to have high interest rates?

Does this all sound OK?

krazyk

I'm struggling to create a spreadsheet with accurate-ish interest calculations. I know in reality most accounts calculate it by day but I've set my sheet up to calculate by month and the formula is:

[Balance of account] / 100 * [Interest Rate] / 12 [months]

Is this the best way or am I way off?

For example, on the TSB £2000 limit 5% account is works out to be about £102 interest per year?

bowlhead99

krazyk wrote: »

I'm struggling to create a spreadsheet with accurate-ish interest calculations. I know in reality most accounts calculate it by day but I've set my sheet up to calculate by month and the formula is:

[Balance of account] / 100 * [Interest Rate] / 12 [months]

Is this the best way or am I way off?

For example, on the TSB £2000 limit 5% account is works out to be about £102 interest per year?

You are not way off, but you can tell you have got something a little wrong because 5% of £2000 is only £100, so the total interest can't be more than £100 and you are getting £102...

The 5% quoted by the bank is an 'annual equivalent rate'. This means that the rate they really give you is a bit lower, but for example after January you will have interest for January so that going into February there is more in your account, and going into March there is more in your account, and you are starting to earn interest on interest. This compounding of interest will eventually produce £100 on the £2000 which is an "annual equivalent" rate of 5%, even though the *actual* rate they give you is only 4.89%. The AER which all banks quote lets you see what you would get if the amount was deposited at the beginning and paid out in one lump at the end which is the 5% (£100 on £2000).

If you go to the TSB product page at http://www.tsb.co.uk/current-accounts/ it says

5% AER/4.89% gross variable interest paid on balances up to £2,000

. If you changed your 'divide by 12 to get a monthly rate' formula to start with the 4.89% gross rate instead of the 5.00% AER you would be OK. In other words use 0.4075% as the monthly interest rate instead of 0.41666666% a month. With a calculator you can see that the 0.4166666% a month which comes from your simple "divide 5% by 12" is about 1.02 times bigger than the 0.4075% you should be using, which is why you are getting £102 at the end instead of £100.

So, doing it that way will get you a close enough figure - in other words, take the 'gross rate' from the bank's product pages instead of the AER to feed your calculations. Or alternatively just use the gross rate and then divide the result by approximately 1.02. That level of inaccuracy can't possible matter to your lifestyle planning.

If you want to work out on your own spreadsheet how to get from AER rate to gross rate it is quite simple. Basically compound interest works using the 'to the power of' calculations you probably had at school. So a monthly interest rate for two months (i.e. compounded once) is like having the interest rate squared, or for three months (compounded twice) is interest rate cubed, for four months is the interest rate to the power of four, or for a whole twelve months is the interest rate to the power of 12. Or 1.004075ish ^12 =1.05 after a year.

So if you wanted to go back down the other way, it would just be 1.05^(1/12) = 1.00407412378 which you could get by typing it into a spreadsheet formula.

In reality the bank pays you interest monthly but some months are longer than others and generally your account balance might change from day to day rather than being one fixed number, so you will probably not get your estimations perfect, but close enough for decision-making.

--
Finally for all the pedants out there, actually you can't get £100 of interest from a TSB account after a year, because they stop paying interest at £2000, so after about half a year when you're sitting there with close to £2050 in the account, you are only earning interest on the first £2000, so you never quite earn enough 'interest on interest' to get up to the £100 total. You would only earn interest on that last £50 by moving it out into some other account instead as it was earned. However, with smaller amounts it works fine (e.g. £1000 for a year gives £50 and £1800 for a year gives £90).

lilyp

Ive read this with interest as have similar amounts to play with.

One thing i'm worried about is that by having lots of current accounts will it affect your credit rating? I currently have a mortgage but am looking to move again within 18 months and I don't want to do anything to jeopardise getting a loan.

krazyk

Just a quick update on my progress on all this. Sadly BOS declined my application so I'm easing off for a bit. I might have to wait a month to check my Clearscore credit report (only just got a report from them) to see if the rejection was due to the score going down (which it must have with all the applications I've put in during the last week).

This is a pain though but means getting up to the required amount of accounts is going to be a long term process (at best), which is a bit disappointed. It could also mean that this is as far as I can take the multiple account set-up. So I'm short by 3 x BOS and 1 x Tesco Bank atm.

I might try applying for the latter as I've just got my first Tesco Bank letter through today. If the second Tesco Bank gets approved then perhaps it's a specific issue related to BOS so maybe I need to look at other 3% current account banks. The only issue (and it's a small issue) that I can think of with BOS is that I had to select the Edinburgh branch as my local branch. I live in Kent!

Other issues, you can only transfer £10k a time from Nationwide so moving £20k to Santander 123 is a two step process. I have swapped two DDs to Santander but I'll only be making roughly £2 cashback so won't cover the new higher £5 fee. With council bills to start coming off from next month, it will roughly be £3 cashback but still not up to £5.

Anyway, so far it's been a bit up and down.

bigadaj

krazyk wrote: »

Just a quick update on my progress on all this. Sadly BOS declined my application so I'm easing off for a bit. I might have to wait a month to check my Clearscore credit report (only just got a report from them) to see if the rejection was due to the score going down (which it must have with all the applications I've put in during the last week).

This is a pain though but means getting up to the required amount of accounts is going to be a long term process (at best), which is a bit disappointed. It could also mean that this is as far as I can take the multiple account set-up. So I'm short by 3 x BOS and 1 x Tesco Bank atm.

I might try applying for the latter as I've just got my first Tesco Bank letter through today. If the second Tesco Bank gets approved then perhaps it's a specific issue related to BOS so maybe I need to look at other 3% current account banks. The only issue (and it's a small issue) that I can think of with BOS is that I had to select the Edinburgh branch as my local branch. I live in Kent!

Other issues, you can only transfer £10k a time from Nationwide so moving £20k to Santander 123 is a two step process. I have swapped two DDs to Santander but I'll only be making roughly £2 cashback so won't cover the new higher £5 fee. With council bills to start coming off from next month, it will roughly be £3 cashback but still not up to £5.

Anyway, so far it's been a bit up and down.

How did you apply for the bos account, if online then you can ring them up and apply with a better chance of success. My first account opened fine online, but my second was rejected, so I opened my second and third on the phone, not a problem just a little time consuming.