Rationalising Bank Accounts

rangers_fc

We have had multiple Current Accounts & have been sweeping funding through them as appropriate to fullfill the account criteria for a lengthy period with the balance maxed out for interest purposes. Now with the end of the direct debit facility from Tesco I am unsure what to do to maximise interest We currently hold

3 x Club Lloyds
3 x BOS Vantage
2 x Satander 123

All these accounts require 2 direct debit instruction, We have 5 or 6 companies that we hold direct debit instruction with . I hold a Tesco bank account paying 1.2% I would like to rationalise our banking and am tempted to close the Satander Accounts, and close 2 of each the LLoyds & BOS accounts leaving a joint account in each bank.

What it comes down to is what is the best way to organise our finance, I can get 1.5% at Satander earn approx £3 for the direct debit instructions and pay a £5 fee on £20,000 which I then earn 1.5% on or have 2 BOS, LLoyds accounts paying 2% on £5000 and put the remaining balance in Tesco at 1.2%.
I have in the past had multiple regular Savers running in conjunction with the accounts listed but have stopped utilising them currently.

I have utilised the M&S & Nationwide & Coop switch incentives & find myself at a crossroads unsure what to do next. We have one big wage coming in so would be unlikely to qualify for 2 HSBC Or Natwest accounts. If the direct debit facility ends as anticipated at Tesco what would be the best way forward. Thoughts apreciated

EachPenny

If you ignore the 123 cashback on the direct debits for a moment then the effective interest rate the 123 account pays is 1.2% (assuming the account has the full £20k all the time and you pay £60pa fees).

The current issue of the Tesco Internet Saver pays 1.3%, so you'd get more by transferring your money from the 123 accounts to Tesco.

There are alternative savings accounts that collect deposits by direct debit and as there are two of you it would be possible to open several of these accounts which might just give you the number you need (have a look at the Tesco DD thread for the list of options).

Otherwise, getting additional DD's to qualify for the interest paying current accounts will cost you a minimum of £1 each.

So that brings us back to the DD's you currently have with Santander. If any of those generate less than £1 per month cashback then it makes sense to use them to qualify for one of the other accounts rather than getting the cashback.

If, after moving any DD's to other accounts, the DD's remaining with Santander would generate cashback of more than £1 in total then it would make sense to downgrade the 123 account to 123Lite (£1/month fee). Otherwise downgrade to the Everyday account and move all your DD's to Lloyds and BoS.

rangers_fc

Thankyou for the information food for thought indeed

Katiehound

and just to add make sure that you are using the 12 payment facility where available ie: for council tax and water rates.
Council tax generally comes as 10 payments but you can request 12, and now would be the time to do so before the next financial year.

Kim_13

Have you had the 5% year of Nationwide FlexDirect yet? If not, it makes sense to get that. Pays the 5% on £2,500 and allows access to a Regular Saver also paying 5%, taking £250 per month. No DD's needed for that one.

There's also the TSB Classic Plus for 3% on £1,500 which doesn't require any DD's also.

Club Lloyds and BOS now only pay 2%, down from the 4% and 3% they previously paid.

If you decide to keep a 123 or 123 Lite with Santander, there's also a 5% Regular Saver there taking £200 per month.

ceredigion

NS&I - Guaranteed Growth Bonds 2.20%
Job done, and forget the DD's

Kim_13

Just to add that the Guaranteed Growth Bonds are a 3 year fix at 2.2%, however money can be withdrawn early for a penalty of 90 days interest on the amount withdrawn. Another poster crunched the numbers and calculated that it's better to take the 3 year and pay the penalty rather than take the 1 year version at 1.5%.

MDMD

Post 22 here gives the rates for cashing in early.

https://forums.moneysavingexpert.com/discussion/5753722

Just to note that they apply a penalty to the capital not the interest so the amount they knock off still uses up your PSA or would be taxable if no PSA available.

rangers_fc

[FONT=&quot]I am aware of the TSB & Nationwide accounts and am currently utilising the 5% RS with Nationwide.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot] I haven’t used fixed rate bonds before as having the funds available seemed beneficial. Its hard to decide how much 1 should keep as available money. I have a portfolio of investments but have a significant figure in instant access accounts its striking the balance that I may not be good at.
I would be tempted to invest more but want to have some protection if the stock market has a correction. I am currently 10 years from retirement assuming I finish at 60. So I have been utilising the banks. The regular savings accounts have had their uses but are now getting to the point where the work involved outstrips the benefit.
National Savings 2.2% seems attractive currently, however surely at some stage interest rates are going to rise. Probably time to switch a few Direct Debits in preparation for the DD black hole & downsize my banking portfolio[/FONT]
[FONT=&quot]Thanks for posts so far, its giving me perspective.[/FONT]

badger09

Nothing to add to what others have said in terms of managing your cash but....

If I've read correctly, you are holding around £70k in readily accessible cash. You are 50 (ish) and have another 10 years to retirement at 60. After retirement you can probably look forward to another 20 - 30 years, so hopefully plenty of time to ride out any 'corrections':)

Over that 30 - 40 year period, the value of your cash pot of £70k is likely to be substantially reduced by inflation.

So my questions are, why so much cash?
Will you need a £70k cash lump sum at 60?
What is your & your wife/husband/partner's pension provision like? Are you maximising the tax relief on pension contributions?