Am I being daft or am I not getting paid the right amount of interest?

KatrinaPC

Hi, hope somebody can give me a hand! I'm good at living with a budget but not so saavy about saving and interest rates.

So I currently have 123 student account with Santander, who say that the rates are:

Account Balance AER / gross (variable)
£100+

---

1.00% AER/ Gross
£200+

---

2% AER / 1.98% Gross
£300 (Up to £2,000) ---- 3% AER / 2.96% Gross

(personally I think its sneaky advertising 3% and then taking it off you once you have over 2k and not telling you what you get for over 2k.....)

I have £13.5k in there, give or take a few hundred since Feb17, and over £10K since September. (I'm a stingy student who has also worked through uni....... I am determined to be home owner one day!)

And yet I'm only getting between £4 and £5 interest paid per month? I'm assuming I'm on the 1.98% gross rate, so rounding that up to 2% for easy maths I would expect to be paid £260 over 12 months on my 13.5k, which would equal around £20 paid per month interest assuming my balance didn't change.

So I think that leaves me with three options:
- 1. I being underpaid interest by my bank account (and if I am, what do I do about it and can I back claim?)
- 2. I am being daft and have misunderstood how interest works
- 3. My maths is dodgy

Any help would be appreciated, thankyou!

EachPenny

Hi Katrina,

They pay 3% interest, but only on your balance up to £2000, anything over £2000 gets no interest at all (well who would expect a student to have more than £2000 savings )

£2000 x 3% = £60 per year. £60 divided 12 months = £5/month

You need to find a new home for your savings over £2000... there's lots of options.

YorkshireBoy

KatrinaPC wrote: »

Any help would be appreciated, thankyou!

It's 2.

And also 4. (I haven't read my account T&Cs)

You must have at least £100 in your account to receive interest. You’ll earn interest on the first £2,000 of your entire balance. If you have more than £2,000 in the account, this money won’t earn interest.

Ed-1

KatrinaPC wrote: »

Hi, hope somebody can give me a hand! I'm good at living with a budget but not so saavy about saving and interest rates.

So I currently have 123 student account with Santander, who say that the rates are:

Account Balance AER / gross (variable)
£100+

---

1.00% AER/ Gross
£200+

---

2% AER / 1.98% Gross
£300 (Up to £2,000) ---- 3% AER / 2.96% Gross

(personally I think its sneaky advertising 3% and then taking it off you once you have over 2k and not telling you what you get for over 2k.....)

I have £13.5k in there, give or take a few hundred since Feb17, and over £10K since September. (I'm a stingy student who has also worked through uni....... I am determined to be home owner one day!)

And yet I'm only getting between £4 and £5 interest paid per month? I'm assuming I'm on the 1.98% gross rate, so rounding that up to 2% for easy maths I would expect to be paid £260 over 12 months on my 13.5k, which would equal around £20 paid per month interest assuming my balance didn't change.

So I think that leaves me with three options:
- 1. I being underpaid interest by my bank account (and if I am, what do I do about it and can I back claim?)
- 2. I am being daft and have misunderstood how interest works
- 3. My maths is dodgy

Any help would be appreciated, thankyou!

You get 3% AER on up to the first £2,000 if the balance is at least £300 and no interest is paid on balances above that.

So you get 2000 x 0.03 = £60 interest per year.

As it's paid monthly you get (2000 x 0.0296)/365 x (number of days in the month) each month.

2357

Above £2000 you get no interest then.

Using the rounded percentage for ease....
Assuming you have had £2000 plus in the account, 3% of that is £60 for the year.
Divide that by 12 to find your monthly rate. £5.

KatrinaPC

woah so they are bigger robbin' so and so's than I thought - that's really sneaky for the over 2k thing, I thought you just reverted to the 200+ rate!!!! Thanks for clearing that up guys

hmm yeah I'm not exactly the life of the party as a student, but clearly it pays to have a job and be tea-total :P

RIght so its look for other options pronto and kick myself for leaving it there for the last 12 months. Need these cash lifetime ISAs to hurry up and arrive so I can dump a load in one of those.

Any suggestions for where I should chuck it all in the meantime? I'm going to have to overhaul the lot in two months when I graduate anyway which is what has spurred me to ask this (I've been squinting at it for probably half a year already going 'hmmmmm that is that right?'). Looks like I need to spend a few days digesting the world of current accounts (....yay).

xylophone

http://www.skipton.co.uk/savings/isas/lifetime-isa

Just in time for graduation.

Once you have graduated you could upgrade to a standard 123 account?

You might wish to look into the possibility of opening a Flexdirect account with Nationwide - this would give you 5% on £2500 for a year (provided that you pay in £1000 a month from a non-Nationwide account - you could set up SO from Santander to NW and from NW to Santander for £1000 for the same day each month).

Having the Flexdirect would mean that the Flexclusive monthly saver would also become available to you.

Thrugelmir

KatrinaPC wrote: »

woah so they are bigger robbin' so and so's than I thought

Current accounts aren't savings accounts as such.

EachPenny

Welcome to the world of banking small print Always check the details very carefully and if in doubt ask - try and get the answer in writing (an email will do) if it still looks dodgy.

A no-brainer is to open the Santander Regular Saver - you can add £200 per month for a year and get 5% interest. You can open it online in a couple of minutes. You can roll the 123 Student account into a Graduate account, but that still has the limit of £2000 for interest payment, but it is probably worth hanging on to the account as 3% on £2000 is quite good in comparison to what you'll find elsewhere.

You need to check the T&C's for your account to see what it says about having other current accounts at the same time as your 123 Student account - some banks want you to bank exclusively with them in order to get the student benefits. The online T&C's suggest you just need to use your 123 Student account as your 'main' account - but make sure there is nothing else you've agreed to.

There's lots of discussion on the forum about the best current accounts for interest - usually combining them with regular savings accounts (like the Santander one) to maximise your interest.

The Nationwide FlexDirect account pays 5% for the first year with a linked regular saver at 5% too. Then there's various accounts paying either 3% or 2% - but the catch is you need to be paying out direct debits to get the interest (more small print ). Most people don't have enough DD's but there are ways around this if you do your research on the forum.

I left uni in a similar position to you, although I also owned a house by the time I graduated (but that was when £5k was enough for a deposit!). Having the job and being sensible with your money has put you in a great position to get ahead in life, so just make sure you now maximise the interest you earn on your money until you need it to buy your home. Good luck

EachPenny

xylophone wrote: »

Once you have graduated you could upgrade to a standard 123 account?

Possibly not the best choice, as the graduate account still pays 3% on £2000, so better to move all but £2000 into other accounts rather than getting 1.5% on everything in the standard 123?

cheesetoast

Why not just change the account into a standard 123 account?