First Direct - Regular Saver Account - 2.75% AER/Gross p.a. fixed for 12 months

ncmscnc

Hi, 
Could someone help me with this bit before I can open this account. Not sure if I am missing anything here.
My calculation shows and on the website says the interest paid will be £53.63 on £3600 commitment on a £300 per month basis.

Which is barely above inflation, I think. Am I missing something here, what's all the fuss about this account?

jamei305

For the vast majority of time you'll have far less than £3600 in there, so the "effective interest on £3600 commitment" isn't actually the effective interest or the commitment you are making. The average commitment is around £1800 and the effective interest rate is 2.75%.

ncmscnc

Average commitment... sounds logical.
 

Still, majority of the subscribers would be transferring on a monthly basis direct from Salary. Cutting back on their lifestyle.
They are committing to the locking the full amount for the year and withdrawals are not allowed. 

RG2015

Every pound in the account will earn 2.75% pa for a one year commitment. The best one year rate at the moment is 1.22% pa.

The source of the funds, salary, savings, bonus etc is irrelevant. 2.75% compared with 1.22% is worth the fuss.

ZeroSum

One little niggle to add, is that once it has matured they hold onto your cash for another week only giving you 0.01%

No other bank does this, no idea why they do cos it is annoying 

EthicsGradient

ncmscnc said:

They are committing to the locking the full amount for the year and withdrawals are not allowed. 

You don't have to commit to the full amount; you can cut the payments to £25/month (and increase them back later, to above £300 if you want, as long as you don't 'overtake' the £300/mth average limit). Withdrawals mean you lose practically all the interest, but they can be done.

SFindlay

ncmscnc said:

Still, majority of the subscribers would be transferring on a monthly basis direct from Salary. Cutting back on their lifestyle.
They are committing to the locking the full amount for the year and withdrawals are not allowed. 

So like any other product if it doesnt suit don't apply!! Nobody is forced to open this or any other product, each individual decides what they wish to do with their money so for those of us who have the spare cash to put into these kind of products they are very welcome and dont worry about me I can fund my First Direct regular saver and several others WITHOUT having to cut back my lifestyle so hope that puts your mind at ease. 

xylophone

One little niggle to add, is that once it has matured they hold onto your cash for another week only giving you 0.01%

Relative's matured on 20th and was in his FD E Saver on 21st, ready to transfer to the current account and then wherever he liked by FP.

RG2015

ZeroSum said:

One little niggle to add, is that once it has matured they hold onto your cash for another week only giving you 0.01%

No other bank does this, no idea why they do cos it is annoying 

This is not the case for me as I have had two and the proceeds were available on the maturity day (October 2018 and October 2019).

Nevertheless I will pay particular attention this coming October. 

ncmscnc

I am new to the savings products. Very interesting.
Every pound certainly earns 2.75% pa.
Owing to the maximum £300 cap that can go into the account per month, is it fair to say that over a year... it has cost the bank 1.49% to raise the capital (assuming 100% subscription at £300 per month) - which they can invest further on other projects? 

RG2015

ncmscnc said:

I am new to the savings products. Very interesting.
Every pound certainly earns 2.75% pa.
Owing to the maximum £300 cap that can go into the account per month, is it fair to say that over a year... it has cost the bank 1.49% to raise the capital (assuming 100% subscription at £300 per month) - which they can invest further on other projects? 

Yes, but you cannot just quote a figure of 1.49%. It has no meaning if you don't qualify it by time period.

It may equate to an arithmetic 1.49% but it is still 2.75% per annum for the amount of money they have on their books at the end of each month.

As to investing in further products, after 12 months they give it back to the subscriber.