Loss of interest while moving money

Margaret_Millne

Has anyone worked out what the increase in rate of interest needs to be to make it worth our while to swap savings accounts, bearing in mind there will be some loss of interest while moving the money? And how long will the money have to remain in the new account to make up the loss?

I worry that moving money from an account with, say, 4.75% interest, to one with 5% interest, may actually loose money short or even medium term, and make it not worth the hassle.

MJSW

Based on 4.75% and 5%, you are gaining interest of 0.25%x1/365 for each day after the transfer. But you miss out on 4.75%x1/365 for each day that  the money is in transist and earning no interest.

For each day that lose interest, you would need to leave the money in the new account for more than 19 days in order to be better off. So for example a transfer which lost you 3 days interest would require the money to be left in the new account for at least 57 days in order to 'break even', and you would start to be better off after that.

Margaret_Millne

So it's not too onerous then, and definitely still worth moving, even for .25% increase, providing you don't move the cash too often.

Thanks, I knew someone out there would be able to work it out.

DiggingOut

Based on 4.75% and 5%, you are gaining interest of 0.25%x1/365 for each day after the transfer. But you miss out on 4.75%x1/365 for each day that  the money is in transist and earning no interest.

For each day that lose interest, you would need to leave the money in the new account for more than 19 days in order to be better off. So for example a transfer which lost you 3 days interest would require the money to be left in the new account for at least 57 days in order to 'break even', and you would start to be better off after that.

This is of course based on the assumption that the differential in rate between the two accounts does not change.

For instance, if next month rates go up again and the old account increases by 0.25% while the new one increases by 0.1%, the whole equation changes.