Chasing the best interest rate

FeeCorner

Should I be switching bank accounts for savings every year to chase the best interest rates for savings? It seems easy to do but ends up with having loads of accounts?

surreysaver

That's what we're all doing 

amanda1024

You don't necessarily have to keep them all open once you've moved the money out. If you go through the switching process (to get switching rewards) the old account generally gets closed automatically 

born_again

amanda1024 said:

You don't necessarily have to keep them all open once you've moved the money out. If you go through the switching process (to get switching rewards) the old account generally gets closed automatically 

Only current account, not any savings accounts.
So savings need to be manually closed 👍

ColdIron

FeeCorner said:

Should I be switching bank accounts for savings every year to chase the best interest rates for savings?

These are often two different things. People will switch current accounts for the bonus but they rarely pay good rates. People will open savings accounts for good rates and while some of them require a current account many don't

So what do you have in mind, the best interest rates or the bonus?

Albermarle

FeeCorner said:

Should I be switching bank accounts for savings every year to chase the best interest rates for savings? It seems easy to do but ends up with having loads of accounts?

Regarding savings accounts, yes you should be regularly monitoring that you are getting decent rates, and be prepared to switch as and when necessary. Often you can move accounts but stay with the same provider which is easier. 

However should you be looking to switch and open new accounts on a weekly/monthly basis to chase the latest 0.1% increase in rates? This is more debatable. Some people do and have many different live and dormant accounts.  However it can be a lot of effort for a limited reward, so not everybody's cup of tea.

jimexbox

FeeCorner said:

Should I be switching bank accounts for savings every year to chase the best interest rates for savings? It seems easy to do but ends up with having loads of accounts?

Keep one account for direct debits. Then move everything else as the best accounts change. 

malcolmw_3

I’ve been checking best rates and looked at Beehive which pays interest yearly and compared with a monthly interest payer (Marcus). On paper Beehive is 5.12% and Marcus at 4.75%. On a £10000 deposit there’s an annual difference of around £26 so only a couple of pounds per month, calculated as single v compounded . Just a reminder there’s more to savings rates than just the numbers. 

refluxer

malcolmw_3 said:

I’ve been checking best rates and looked at Beehive which pays interest yearly and compared with a monthly interest payer (Marcus). On paper Beehive is 5.12% and Marcus at 4.75%. On a £10000 deposit there’s an annual difference of around £26 so only a couple of pounds per month, calculated as single v compounded . Just a reminder there’s more to savings rates than just the numbers. 

But you only mentioned the numbers - if you're saying you'd choose Marcus over Beehive (despite the lower rate), can you say why that would be to help make your point a bit clearer ?

£10k in Beehive @ 5.12% AER gives £512 in interest and £10k in Marcus @ 4.75% AER gives £475 (presuming that the monthly interest is paid into the account and allowed to compound), so the difference is £37 PA.

ColdIron

malcolmw_3 said:

I’ve been checking best rates and looked at Beehive which pays interest yearly and compared with a monthly interest payer (Marcus). On paper Beehive is 5.12% and Marcus at 4.75%. On a £10000 deposit there’s an annual difference of around £26 so only a couple of pounds per month, calculated as single v compounded . Just a reminder there’s more to savings rates than just the numbers. 

Marcus pays 4.65% gross. If you leave the monthly interest to compound it will pay 4.75% AER so a difference of £37 with Beehive at 5.12% gross/AER

Have a read of this to see how AER/gross works

https://www.moneysavingexpert.com/banking/interest-rates/#save

malcolmw_3

Sorry if not clear but I wouldn’t personally switch accounts for a couple of pounds a month especially as I’m taxed on interest as well so £37 shrinks even more. However I completely understand if someone can be motivated to switch for £20 something increases in income (per10000 that is).