Current account for savings?

ijoycaptain

After talking to a few people on this forum I’ve learnt that lots of people are opening up current accounts to us as savings accounts... presumably as they pay higher interest than most savings accounts... but how come banks don’t up their interest on savings and lower it on current accounts - in a bid for people to save with savings accounts- which is their intended purpose.

Also, would it be against bank terms and conditions to use a current account as savings?

Kim_13

No, it's not against bank terms and conditions to use a current account for savings. Some (if not all) applications ask the purpose of the account, with savings as one of the options.

By offering higher interest on current accounts than savings, they are better able to restrict the amount of interest they pay out. They couldn't for example state that you need to pay out Direct Debits from a savings account to receive the interest, as savings accounts don't have this facility. Current accounts also allow them to offer you an overdraft, either arranged or unarranged. If you one day start spending the savings, there's the possibility you could end up paying them interest, rather than just having an account sit there on zero once you've used the balance of the account.

Regular Savings Accounts are savings accounts offering comparable rates of interest to current accounts, though only on limited amounts.

You may find the high interest section of the MSE best bank accounts guide useful: https://www.moneysavingexpert.com/banking/compare-best-bank-accounts#interest

Flobberchops

Interest paying current accounts generally come with some kind of qualifying criteria designed to encourage brand loyalty, e.g. requiring direct debits or a minimum monthly pay-in. They also tend to put a relatively miserly cap on the amount of interest actually achievable.

Banks value active, engaged customers who buy insurance and take out loans and credit cards. Giving customers the option to open a savings account, dump in a lump sum and do all their other financial shopping elsewhere is not really what they want.

datlex

How would it be against banks terms to keep some of your money in a current account? As far as I am aware there is not a limit on how much you can keep. How much you should is a different matter. The fact they pay interest on those accounts is their chose so long as you fulfil the criteria set for that particular account.

Some monthly savers have a higher nominal rate than current accounts e.g. M&S is 5% v Tesco Current Account 3% but whilst you can put the whole £3000 in at once in the Tesco account, you feed £250 in each month to the M&S. The overall interest is actually higher on the 3% than the 5%. (£90 v £81) Making it more beneficial to have a high interest current account than savings if you can't fund both.

YorkshireBoy

datlex wrote: »

The overall interest is actually higher on the 3% than the 5%. (£90 v £81) Making it more beneficial to have a high interest current account than savings if you can't fund both.

If you have £3K in a Tesco current account you can fund both. And doing so would see a 4%+ return on the £3K in your example.

Nebulous2

It's a rather painful exercise trying to change bank behaviour - making them pay more for savings accounts. Just as it is campaigning about any company behaviour, such as treating new customers much better than existing ones.

What companies recognise is people voting with their feet - numbers of customers.

So if a loophole / hack / special offer is there, use it, profit from it and be grateful. That's much more productive than railing against it.

binaryuniverse

datlex wrote: »

Some monthly savers have a higher nominal rate than current accounts e.g. M&S is 5% v Tesco Current Account 3% but whilst you can put the whole £3000 in at once in the Tesco account, you feed £250 in each month to the M&S. The overall interest is actually higher on the 3% than the 5%. (£90 v £81) Making it more beneficial to have a high interest current account than savings if you can't fund both.

In that instance you start drip feeding the £3000 in to the regular saver. Get interest both ways. :beer: