Savings Account vs Current Account when the Current Acct has same interest as Savings Account

bp5678

I have about £8k of money sitting in an account which isn't getting much interest. I'm evaluating my options on where to put it to get the best interest.

My first question is: Is there a difference between a Savings Account and a Current Account when the current account pays a similar/the same interest as a savings account? Would there be any advantages of choosing the savings account option?

Is there a short and sweet answer on where to put this £8k for it to grow? Not looking to invest.

Just FYI/context, I already have:
- Nationwide FlexDirect account - 5% interest up to £2500. Therefore I'm going to leave £2500 in here and the remaining £8k goes somewhere else.
- Lifetime ISA
- Help To Buy ISA

agrinnall

There's no significant difference, the main thing is that there is likely to be greater functionality (debit card, chequebook, transfers, withdrawals, DDs, etc.) on the current account rather than the savings account. I have money distributed in both types of accounts in order to maximise interest earned.

eskbanker

Opening a current account will require a credit check, whereas this doesn't apply to a savings account - this may make a difference for those with a poor credit history or perhaps those anticipating an imminent credit application such as a mortgage.

Some current accounts, especially those with the best benefits, have more stringent prerequisites, such as income requirements, or the need to have direct debits to earn interest.

If you have a FlexDirect, you can open a regular saver that also pays 5%, albeit you can only pay in £250 per month.

Other options at https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

bp5678

eskbanker wrote: »

Opening a current account will require a credit check, whereas this doesn't apply to a savings account - this may make a difference for those with a poor credit history or perhaps those anticipating an imminent credit application such as a mortgage.

Some current accounts, especially those with the best benefits, have more stringent prerequisites, such as income requirements, or the need to have direct debits to earn interest.

If you have a FlexDirect, you can open a regular saver that also pays 5%, albeit you can only pay in £250 per month.

Other options at https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Thanks.

Based on the link, I've tried to calculate my best options but I'm almost certain I've misinterpreted things/made mistakes. Am I right in thinking:

1) Virgin Money - Easy-access savings
Rate AER available 1.5%, min/max deposit £1/£1m, withdrawals twice per year.

So 1.5% of £8k is £120.

2A) Tesco Bank - Easy-access savings
Rate AER available 1.45% (incl 0.9% bonus for 12mths), min/max deposit £1/£1m

So 1.45% of £8k is £116. 0.9% bonus of £8k is £72. So £118 + £72 = £190.

2B) Alternatively, their bank account is 3% on £3000. You can open it twice so 6% on £6000 = £180.

3. Atom Bank - Fixed-rate account - 1 Year
Rate AER 2.05%, min/max deposit £50/£100,000, open via app

So 2.05% of £8k is £164.

notbritishgas

The bonus is included in the stated rate not worked out separately so after the bonus period the rate drops significantly.
So the best bet is the Atom account.

radoslaff

bp5678 wrote: »

Thanks.

Based on the link, I've tried to calculate my best options but I'm almost certain I've misinterpreted things/made mistakes. Am I right in thinking:

1. Post Office* - 1.45% AER variable - Easy-access savings: allows withdrawals
Post Office* offers a decent rate of 1.45%, including a fixed 1.2% bonus for 12 months. It lets you make unlimited withdrawals and deposits online and you can open it with just £1

So if I have £8k. Then 1.45% of £8k is £116. Also a 1.45% bonus of £8k is £96. So I'll get a total of £212.

You've got this wrong. This will mean that their normal interest is 0.25% and with the bonus it goes up to 1.45% for 12 months. After that back to 0.25%.


But if your credit history allows you, it's much more worth it to have 2 Tesco current accounts (3% for up to £3,000) and one TSB current account (5% for up to £1,500).

bp5678

nonesuch wrote: »

How about Marcus Goldman Sachs? It also offers 1.5% interest rate, but with unlimited withdrawals.

If you have children and have a need to save for them long term, then also Nationwide Future Saver would be a good choice but there are others here: moneysavingexpert.com/savings/child-savings-tax-free/

All my savings are in these accounts below - most of it in Marcus though, as all the other accounts have limits on the amounts they pay interest for.

Marcus Goldman Sachs 1.5%
Halifax Kids Monthly Regular Saver 4.5%
Nationwide Flex Online Regular Saver 5%
Nationwide Kids Future Saver 3.5%
Nationwide FlexPlus current acct 3%
Nationwide FlexDirect current acct 5%

Seems to be very little in it between the Marcus account and the Virgin account I posted originally (both 1.5% interest). Marcus may just be slightly better but seems little difference for me. I don't have kids (only 24 years old).

bp5678

radoslaff wrote: »

If your credit history allows you, it's much more worth it to have 2 Tesco current accounts (3% for up to £3,000) and one TSB current account (5% for up to £1,500).

That part in bold may just be my best option, thanks.

Katiehound

For the Tesco current a/c you will need DDs. Not sure how many, maybe 3? (for each a/c) There is also a minimum pay in per month.
Sorry can't be more helpful- my a/cs are subject to earlier & less restrictive conditions.

You could feed £250 pm into the Nationwide RS which pays 5%.

londoninvestor

agrinnall wrote: »

There's no significant difference, the main thing is that there is likely to be greater functionality (debit card, chequebook, transfers, withdrawals, DDs, etc.) on the current account rather than the savings account. I have money distributed in both types of accounts in order to maximise interest earned.

A good point which didn't strike me until others made it on this board is that savings accounts are arguably more secure, in the sense that there are fewer ways for money to get out of them - usually you can only withdraw to a linked account, which reduces the ability of crooks to steal from you or scam you.

As someone here said (sorry, I forget who), it's particularly good to make sure that the majority of your savings aren't in the account that belongs to the debit card you walk around with.

YorkshireBoy

bp5678 wrote: »

2B) Alternatively, their bank account is 3% on £3000. You can open it twice so 6% on £6000 = £180.

You can, yes. And that will double the amount you can save. But I'm fairly sure they won't double the interest rate too!

In the scenario above Tesco would make you a maximum of £177.60. I'll leave you to work out why it's not £180.