BACS Vs CHAPS

oshoshitzu

If I transfer £35,000 to the IceSave Fixed rate 6 month account. AER 6.86%.

Which works out cheaper BACS; or CHAPS (£20 fee) ?


THANKS

poppy10_2

We'd need to know where you are transferring it from, and what the interest rate is there.

oshoshitzu

poppy10 wrote: »

We'd need to know where you are transferring it from, and what the interest rate is there.

Sorry, Transferring from Northern Rock silver Savings online AER 6.0 %

I also pay tax on all my savings interest

poppy10_2

OK,
Your money sitting in Northern Rock is earning £2100 interest a year, which is £5.75 a day.

BACS transfers are free, but usually take 3 working days to go through, so that's £17.26 in lost interest. That's gross, so the figure after tax will be even less.

CHAPS goes through the same day, but costs £20.

I'd go for the BACS transfer, but there's really not that much difference - if you're rich enough to have £35,000 savings, a couple of pounds is not worth losing sleep over.

earlgrey_3

You should save just two days loss of interest with CHAPS at just over a fiver a day after 20% tax. So BACS if you do it at the beginning of the week.

poppy10_2

More scientific version:

http://forums.moneysavingexpert.com/showthread.html?t=257720

earlgrey_3

Does it need science to subtract a tenner from £20?

philadam

poppy10 wrote: »

OK,
Your money sitting in Northern Rock is earning £2100 interest a year, which is £5.75 a day.

BACS transfers are free, but usually take 3 working days to go through, so that's £17.26 in lost interest. That's gross, so the figure after tax will be even less.

CHAPS goes through the same day, but costs £20.

I'd go for the BACS transfer, but there's really not that much difference - if you're rich enough to have £35,000 savings, a couple of pounds is not worth losing sleep over.

Don't forget that's gross interest (assuming a basic rate tax payer). Net is more like £1700 pa or £4.65 per day. Even more reason to use BACS;)

Phil

runciblespoon

One other thing to consider is how likely it might be for the target rate to be withdrawn before the BACS goes through. If it's a limited issue account which you're worried might be withdrawn soon then you may find it worthwhile to spend the extra £2.74 in the hope of netting the 6.86% rate. If you think the rate might soon drop by 0.1% to 6.76% that'll cost you £35/year in interest, so maybe paying £2.74 is worth it.