Challenger Banks - what am I missing?

fanheater

I have accounts with most of the big banks in the UK but I have found myself using Starling heavily since I opened it.

The feature I like hasn't been mentioned in this thread so far: spaces.

Spaces are like virtual savings accounts which you can open and close in an instant. They help me a lot with my budgeting.

For example, my water bill is paid quarterly. So I have a "space" for my water bill and I put in a third of the quarterly bill every month, meaning I don't have to cover my entire as water bill out of one salary.

Another example, I have a twelve month SIM only contract which is discounted for the first six months. So I put half the discount into a space each month and will then draw it down from months 7 to 12 of the contract. So the space equalises my phone bill over the length of the contract.

Monzo offers the same functionality although it's not as flexible, and probably some of the other banks do as well.

But for whatever reason it is Starling that I do this with.

Starling pays 0.5% on balances which is ok considering I have TSB and a new nationwide account topped up.

Takmon

fanheater wrote: »

I have accounts with most of the big banks in the UK but I have found myself using Starling heavily since I opened it.

The feature I like hasn't been mentioned in this thread so far: spaces.

Spaces are like virtual savings accounts which you can open and close in an instant. They help me a lot with my budgeting.

For example, my water bill is paid quarterly. So I have a "space" for my water bill and I put in a third of the quarterly bill every month, meaning I don't have to cover my entire as water bill out of one salary.

Another example, I have a twelve month SIM only contract which is discounted for the first six months. So I put half the discount into a space each month and will then draw it down from months 7 to 12 of the contract. So the space equalises my phone bill over the length of the contract.

Monzo offers the same functionality although it's not as flexible, and probably some of the other banks do as well.

But for whatever reason it is Starling that I do this with.

Starling pays 0.5% on balances which is ok considering I have TSB and a new nationwide account topped up.

A better way to do it would be to open an account such as the Santander 123 Lite Account that pays cashback on your bills and have all your Direct Debits come out of this account.

fanheater

I said nothing about paying direct debits from my Starling account, Takmon. My direct debits are paid mostly from a combination of Halifax and Barclays accounts.

Takmon

fanheater wrote: »

I said nothing about paying direct debits from my Starling account, Takmon. My direct debits are paid mostly from a combination of Halifax and Barclays accounts.

The only two worthwhile accounts to pay your Direct Debits from are Natwest or Santander accounts. Halifax doesn't pay any cashback for DD payments and the Barclays account charges a £4 monthly fee and only pays £3.50 cashback on DD so your effectively paying 50p to have the account.
Moving all your bill Direct Debits to either the Natwest or Santander account will generate the most money.

You also really shouldn't be keeping any money in Starling because the 0.5% interest is very poor and even a standard savings account will easily beat that.
But i noticed you said that you have a TSB account and Nationwide account full up. Assuming these are the high interest accounts you should be putting any money you save into these that you may need access too. Even though they are full you can open many high interest regular savers and fill these up with the money from these accounts then top them back up with your savings each month/week. This will mean you get more interest overall on your money.

fanheater

Takmon wrote: »

The only two worthwhile accounts to pay your Direct Debits from are Natwest or Santander accounts. Halifax doesn't pay any cashback for DD payments and the Barclays account charges a £4 monthly fee and only pays £3.50 cashback on DD so your effectively paying 50p to have the account.
Moving all your bill Direct Debits to either the Natwest or Santander account will generate the most money.

You also really shouldn't be keeping any money in Starling because the 0.5% interest is very poor and even a standard savings account will easily beat that.
But i noticed you said that you have a TSB account and Nationwide account full up. Assuming these are the high interest accounts you should be putting any money you save into these that you may need access too. Even though they are full you can open many high interest regular savers and fill these up with the money from these accounts then top them back up with your savings each month/week. This will mean you get more interest overall on your money.

True, Takmon, but also wrong. Halifax doesn't pay a percentage of DD's back to you but does give you £2 a month into each account that you run two direct debits from. So that's £6 a month across the three Halifax accounts I use (one mine, one joint, one OH). One of those accounts is a recent switch so I am bound to keep two direct debits from that account for the next 4-5 months to collect the £85 or whatever it is.

Same applies to two DD's I am paying out of a TSB account.

As for Barclays, true again but also not the full picture because that is also a recent switch, it is also a Premier account, and it is also linked to a mortgage. So for £4 a month which I don't notice, I get back £36 a month, which I absolutely definitely do notice.

So Natwest and Santander really don't interest me.

As for keeping money in Starling pots at 0.5%, yes I could move the money elsewhere, but no I couldn't get 3% or 5% easily because Nationwide and TSB aren't options, and no I couldn't use a regular saver because that wouldn't make sense for these short term savings.

And if I did move it, then I would lose the budgeting help that the pots provide.

Takmon

fanheater wrote: »

True, Takmon, but also wrong. Halifax doesn't pay a percentage of DD's back to you but does give you £2 a month into each account that you run two direct debits from. So that's £6 a month across the three Halifax accounts I use (one mine, one joint, one OH). One of those accounts is a recent switch so I am bound to keep two direct debits from that account for the next 4-5 months to collect the £85 or whatever it is.

Same applies to two DD's I am paying out of a TSB account.

As for Barclays, true again but also not the full picture because that is also a recent switch, it is also a Premier account, and it is also linked to a mortgage. So for £4 a month which I don't notice, I get back £36 a month, which I absolutely definitely do notice.

So Natwest and Santander really don't interest me.

The trick is to use Direct Debits such as Paypal or the Post office account for those types of accounts to get the rewards.

You then put all your actual Direct Debits through a Natwest or Santander account to get cashback and this will give you additional money on top of what you get now so win win.

fanheater wrote: »

As for keeping money in Starling pots at 0.5%, yes I could move the money elsewhere, but no I couldn't get 3% or 5% easily because Nationwide and TSB aren't options, and no I couldn't use a regular saver because that wouldn't make sense for these short term savings.

And if I did move it, then I would lose the budgeting help that the pots provide.

What you do is open the regular savers to put your longer term savings into and then if you open more than you can pay into each month with your income you then start emptying your TSB and Nationwide accounts into these.
This will then give you room in those accounts for your short term budgeting money but still allow you to get good interest rates on it.

fanheater

The difference between paying DD's from Halifax (x3) and Nationwide or Santander would be minimal for me. Some months it would be better one way, some months the other. But if you factor in the incentive for one of the Halifax accounts, then it will be an awfully long time before using Nationwide or Santander pays me back. Yes I could set up more DD's, but I feel like I'm doing enough.

Takmon, I understand that you are trying to explain how I can make more interest if my money is in a higher interest account.

But you are missing the point I was trying to make, which is that having money in savings pots helps with budgeting. Pouring all your money into one place makes more interest but makes budgeting (slightly) more complicated.

The savings pots are genuinely helpful. I have the two I mentioned, I have one for my next credit card bill (so money I've already spent), I have one to help me net out money between me and my OH, and I have a handful of others too.

Being able to see exactly how much you have for different purposes has made it a lot easier to keep track of things for me. The alternative would be to use a spreadsheet, which I don't want to do.

I have put lots of effort into getting incentives, referrals, cashback and interest, so I appreciate their importance. However in this case the few pennies extra interest in keeping small amounts of money at 1.5% instead of 0.5% is really irrelevant.

As for regular savers, I have a nationwide and first direct one at the moment anyway, so there is also no scope for more of that, at least not without new complications.

carguy143

I like having the savings pots in my Starling account. Especially with the round up feature. It makes the cash easier to get to than having it in a separate account. As a backup, I've got credit cards with two other banks.

System

redux wrote: »

Was it the so-called challenger or traditional main banks that introduced this innovation?

According to an MSE article in Oct 2017, Lloyds/H'fax/BoS looked likely to be the first to do this, early last year, though the article doesn't even mention the challengers.

I think it was actually Clydesdale Bank that was first as I've had that option on my CB app for ages.

Are they a challenger or traditional bank?!

Jonboy123

Recently had my Monzo account closed and they sent my balance god knows where. Not to me anyway. Problem is with these challenger banks, they have no branch you can go into when things go wrong, there customer service is shocking, 6 hours waiting on chat, emails replied to at a whim and their phone line hangs up on you automatically. Also you are seeing them because they are ADVERTISING very heavily. In that advertisement is tonnes of fake reviews, fake social profiles and whitewashing anywhere they can

I would stay with your current bank at least you can go in if needs must.