SMARTER CURRENT ACCOUNT BANKING - GOOD IDEA, PERHAPS, BUT WHERE IS IT?

carlh93sky.com

Lloyds have a loss-leader (still!) and almost market-leading current account interest rate for a balance of £5,000. This is with their "Club" current account. The overall AER works out at 0.78% AER (0.60% on up to £4,000 plus 1.5% on a further £1,000). But no interest on anything above £5k.

Virgin's deal works out at 0.804% AER for the maximum £1k in the 2.02% current account, plus £4,000 in the linked savings account (0.50%). But the low maximum on the current account means manual shuffling back and forth of funds to achieve the overall 0.804% AER without leaving "dead" funds (over £1k balance) in the current account, and without consigning funds which could be earning 2.02% to 0.50%..

Tesco Bank also involves manual shuffling , which is very easy, but now pointless owing to their interest rate situation (see further below).

So, unless someone in the MSE world knows something which I haven't yet uncovered, the choice for a top interest rate on an overall balance (current account only, or current plus handy savings account) seems to lie between Lloyds and Virgin.

SNAG NUMBER 1

If you are looking at a maximum balance of £5k you don't need a linked savings account with Lloyds- or do you? I do, because I need a handy savings account from which to keep topping up/down the Club current account. I see no point in having money (over 5k) earning 0% if it could be earning, say, 0.50% - as at Virgin. If you want a really handy savings account with Lloyds (manual transfers back and forth are not so simple as at poor old Tesco, though) you have to grit your teeth and settle for 0.01%. If you want your current account "buffer" account to earn a decent rate you have to shuttle between two different bank websites.

Obviously, Virgin's 2-part account deals with this snag.

SNAG NUMBER 2

This relates to my wish for an automatic topping up/down arrangement between a current account and an adjacent savings account. You certainly can't have this with Lloyds - even using the savings account with the insulting interest rate already mentioned. (And you can't even set text balance alerts with Lloyds to anything other than warn you if a current account is close to going below £0!)

As far as I have been able to ascertain, Virgin is little, if any, better. I can see no evidence of a facility for an automatic shuttle between the linked pair of accounts.

Does my Nirvana exist, but I simply haven't found it?


NOTE ON FASTER PAYMENTS OUT (FPO)

Virgin seem no better than Lloyds for daily limit on FPO. Compare Tesco Bank, where on both their current accounts (now closed to new customers) and their internet savings account the daily .FPO. limit is £10,000.00 online and £100,000.00 if you place the transfer manually by phone. Anything over £100,000.00 goes by CHAPS with NO CHARGE if sent from an internet savings account (but for this account the transfer must be to an account in the name/s of the account holder/s). There is a £25 charge for CHAPS if you make a transfer of over £100,000.00 from a current account. Alas, Tesco are currently paying 0% on current account balances (they effectively admit to having lost interest in this form of banking), and a measly 0.10% on their internet savings account. So they're no longer a serious player in the current account market (and, at least at how interest rates currently stand, a very faint-hearted one in the savings market!).

RG2015

The VM linked savings account interest is being reduced from 0.50% to 0.35% on 26 April 2021.

Costabit

Does my Nirvana exist, but I simply haven't found it?

I will be interested in how this pans out as have been thinking about where would be the best two part/ one institution combination for a while.
Even after the rate drop, I suspect that Virgin Money will be the highest payer for one current account and one savings account though.
For a variety of reasons, Virgin are not for me so am hoping that somebody has a better solution for a two part/ one institution combo for between £3K and £8K

colsten

Costabit said:

Even after the rate drop, I suspect that Virgin Money will be the highest payer for one current account and one savings account though.

You suspect wrong. A quick calculation shows that VM would have paid £34 after 12 months, whilst Lloyds is £38.99. Plus there are extra benefits at Lloyds - access to their Club Regular Saver, and cinema tickets or magazines, worth another £30-odd a year for those who value these perks.

Either account could easily be combined with the Halifax Reward, which can yield another £60 a year on the currently available Reward scheme. See separate thread.

Whether any of this is of interest to the OP, I don't know.

Costabit

colsten said:

Costabit said:

Even after the rate drop, I suspect that Virgin Money will be the highest payer for one current account and one savings account though.

You suspect wrong. A quick calculation shows that VM would have paid £34 after 12 months, whilst Lloyds is £38.99. Plus there are extra benefits at Lloyds - access to their Club Regular Saver, and cinema tickets or magazines, worth another £30-odd a year for those who value these perks.

Thanks @colsten
Is that on £5k only though ?
I fully utilise Lloyds and Halifax etc for amounts around £5K but thinking that OP and me are both looking at the best single institution for higher amounts that will allow simple quick one stop transfers with every penny earning interest.

Nirvana !!!

RG2015

The original Santander 123 current account for £40,000 (individual plus joint) was brilliant, close to Nirvana. Nothing as good before or since after it reduced rates and increased the monthly fee.

Will we ever see its like again?

colsten

Costabit said:

colsten said:

Costabit said:

Even after the rate drop, I suspect that Virgin Money will be the highest payer for one current account and one savings account though.

You suspect wrong. A quick calculation shows that VM would have paid £34 after 12 months, whilst Lloyds is £38.99. Plus there are extra benefits at Lloyds - access to their Club Regular Saver, and cinema tickets or magazines, worth another £30-odd a year for those who value these perks.

Thanks @colsten
Is that on £5k only though ?
I fully utilise Lloyds and Halifax etc for amounts around £5K but thinking that OP and me are both looking at the best single institution for higher amounts that will allow simple quick one stop transfers with every penny earning interest.

Nirvana !!!

£5K per account. With some accounts, it is possible to hold more than one. E.g. up to 3 BOS Vantage, same interest as Club Lloyds, or multiple Halifax Reward accounts, etc etc etc. Easier to get if you can set up joint accounts but not totally impossible as sole accounts.

In general, current accounts are not meant to be used as savings accounts, which is why we need to be grateful to still have some that can be used as such.