Advice needed current account or savings?

brettmanchester

Good evening,

I was after some advice really, I’m not that clued up with money and over the past year I’ve completely changed my attitude towards money as i used to be horrific, especially with debt.

I currently have two credit cards, one with a zero balance and the other with a balance of around £140 on, this i use on a frequent basis for everyday purchases and then make a full payment every month using a direct debit from my current account.

My question i have is around whether or not its worth placing some money I’ve recently inherited into a savings account or leaving it in my current account. At the moment i bank with Lloyds and have a club Lloyds account and seem to be getting a decent interest rate on the balance that i have, today i inherited £4K and after looking around I can’t see any point in putting the money into a savings account as the rates are no where near as good as my club Lloyds account. 

Can anyone explain to me if I’m mad in keeping a balance of nearly 5k in my current account, as I’m not used to now having so much on hand.

Apologises if you’re just laughing at the post.

hope someone can help

Brett 

EssexExile

Most savings accounts are paying about 0.5% interest at the moment, how does that compare with your Club Lloyds account?

brettmanchester

I will be getting 1.5% by holding a balance between 4K and 5k, and then as soon as it gets t 5k it looks like i will have to transfer some money out as they wont pay interest over 5k. My concern is am i mad for having thousands in my current account, as i said I’m not used to having this amount some people probably have tens of thousands in there’s I’m just in unknown waters 

colsten

It all depends what you are planning to do with the money. If you want/need to spend it anyway, you might as well keep it in your Club Lloyds for now.

If you want to save it, you have various options. A currently popular one is Premium Bonds, but there are also numerous other possibilities. For example, if you are under 40, you could consider a LISA, especially if you are not a homeowner yet. Other options are Regular Savings accounts, where you can get up to 3% AER, if on small amounts of money. If you can save a full £5K, a Halifax Reward account might be attractive (you can shuttle the monthly £1,500 to and fro between the Club Lloyds and the Halifax Reward). Lots of people have also figured out a way of getting the monthly fiver from the Halifax Reward without keeping a penny in the Reward account but this may be a step too far for you if you aren't a seasoned MSE.

eskbanker

brettmanchester said:

I will be getting 1.5% by holding a balance between 4K and 5k

Bear in mind that you only earn 1.5% on the slice between £4K and £5K, with the £4K 'just' earning 0.6% (which is still better than most easy access accounts):

You could earn 0.60% AER (0.60% gross p.a.) variable credit interest on balances between £1 and £3,999.99, and 1.50% AER (1.49% gross p.a.) variable on any part of the balance from £4,000 up to and including £5,000. You won’t earn interest on any part of your balance over £5,000.

ZeroSum

brettmanchester said:

I will be getting 1.5% by holding a balance between 4K and 5k, and then as soon as it gets t 5k it looks like i will have to transfer some money out as they wont pay interest over 5k. My concern is am i mad for having thousands in my current account, as i said I’m not used to having this amount some people probably have tens of thousands in there’s I’m just in unknown waters 

Why do you think it's mad to keep the money in there?

If you just want to keep things simple, then the Lloyd's club account is one of the better choices for keeping balances of upto £5k

mab3000

My main account is my club Lloyds current account and I have £5k saved in there as the interest rate is pretty good for something with instant access. 

I opened a separate Lloyds current account and what I do is on payday I transfer out all my payments for the month, work out how much the direct debits are for the month and leave that money in the club Lloyds account as well as the £5k, and then transfer the rest of the money into the separate Lloyds current account for everyday spending and don’t touch the club Lloyds account at all. 

If you decide to do something similar, might be best to open a separate account with a different banking group rather than Lloyds if you don’t have any accounts open elsewhere, in case something happens eg) IT failure. 

ZeroSum

mab3000 said:

My main account is my club Lloyds current account and I have £5k saved in there as the interest rate is pretty good for something with instant access. 

I opened a separate Lloyds current account and what I do is on payday I transfer out all my payments for the month, work out how much the direct debits are for the month and leave that money in the club Lloyds account as well as the £5k, and then transfer the rest of the money into the separate Lloyds current account for everyday spending and don’t touch the club Lloyds account at all. 

If you decide to do something similar, might be best to open a separate account with a different banking group rather than Lloyds if you don’t have any accounts open elsewhere, in case something happens eg) IT failure. 

It's always best to have at least 2 bank accounts with different banks for several reasons (which includes the ones you mention)

jimjames

Definitely worth keeping it in Club Lloyds, I use my account for exactly that purpose.

Once you go over £5k then you will be best off opening another account for the additional money. Bank of Scotland pay the same as Lloyds and Virgin pay 2% on £1000

nick74

I tend to keep a little over £5k in my Club Lloyds current account, then if the balance creeps up I transfer some into a Club Lloyds monthly saver which allows you to transfer in up to £400 per month and pays 1%.

Eco_Miser

It's not mad to keep nearly £5k in a Club Lloyds current account. It's better to keep exactly £5k, as that is the amount that pays the most interest.

I keep £5k in Club Lloyds and £1k in Virgin Money (@2%) as float/emergency savings.