Santander 123 is now 3% TAX-FREE for most – is the £5/mth fee worth it?
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It's all to do with how APR has to be calculated and the fact that, on this account, interest is paid monthly.seanhayes101 wrote: »Can anyone help with something I'm not quite understanding? in the key questions section of the main article there is the below paragraph about having more than 20K in the account
"What if I've more than £20,000? Any extra above £20,000 gets no interest, which means that if you just left £20,000 in the account the whole time, you'd actually get the gross rate of 2.96% – as the monthly interest earned would take you over the £20,000 limit (and therefore wouldn't be able to earn interest itself). This would mean that instead of getting £600 interest in a year that you'd get if the interest could compound, you'd only get £592."
Does this mean the interest would decrease further the more over 20K you are? I would have assumed you get your 3% on the first 20K and anything over just has no bearing? Does this mean I would need to keep an eye on the account and keep moving out the interest I earn to keep that account at 20K?
I can't get my head round this bit so if anyone out there can provide a layman's explanation of how this would work that would be great.
If you started the year with £10,000 in the account and left it alone (ok, you need to move money in and out to qualify, but lets assume that you always do that on the same day and so doesn't affect the balance) then you'd get £24.67 interest the first month.
The second month you'd have a balance of £10,024.67 and so would get more interest. £24.73, in fact.
And so on.
At the end of the year you'd end up with a balance of £10,300. I.e. you'd have earned £300 interest. On a balance of £10,000 that's 3.00%.
Now, if you started with £20,000 instead the first month you'd get £49.33 interest. Double the first scenario. As expected.
Now, the second month you'd have a balance of £20,049.33. But they only pay interest on up to £20,000 so you'd still get £49.33. Not quite double the first scenario.
By the end of the year you'd end up with a balance of £20,592. That's 2.96%.
The _rate_ of interest that you've been paid has gone down because some of the time you've got money in the account that's not being paid interest on.
Lets take an extreme example. If you started with £40,000. You'd still only get paid interest on £20,000 so you'd end the year with £40,592. That's 1.48% interest. A lower rate, but you haven't lost out any interest.
The most interest you can get in a year from this account is £592.
You get that by having £20,000 or more in there every day.
If you've got another account that can earn you interest then it makes sense to sweep money out of the 123 account into this other account if your balance goes above £20,000. But only so you earn more interest on it that way. You don't lose any interest by leaving it in the 123 account.0 -
I have a 123 account and in general I am happy with it.
However I have recently changed energy supplier and have just noticed that they don't pay the promised 2% cashback on all suppliers.
Their main calculator page just says 2% on gas & electricity direct debit so a bit underhand to only do that on some?
This very probably means that anyone looking at one of the small energy suppliers and who has a 123 account might want to check whether or not their chosen supplier gets the cashback. In my case that is about £40 a year lost, especially poor as Santander are quite happy to up the annual charge to £60.0 -
You pay £2,000 a year in gas/electric bills to a small supplier. That's a very high bill. What would your bill be if you went with a larger supplier that is on the list? I'm with Scottish Power. A fairly large supplier and pay around £500 per year so the cash back is worth £10/year.davidsuffolk wrote: »I have a 123 account and in general I am happy with it.
However I have recently changed energy supplier and have just noticed that they don't pay the promised 2% cashback on all suppliers.
Their main calculator page just says 2% on gas & electricity direct debit so a bit underhand to only do that on some?
This very probably means that anyone looking at one of the small energy suppliers and who has a 123 account might want to check whether or not their chosen supplier gets the cashback. In my case that is about £40 a year lost, especially poor as Santander are quite happy to up the annual charge to £60.:footie:
Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0 -
I am a 71 year old retired Royal Navy Officer. I owe nobody. I have no mortgage. I own 3 houses. I listened to Martin's recommendation of Santander 123 for several weeks and decided to apply. I made sure I fulfilled the criteria for 123. I offered to transfer £500 per month. I have a very healthy income stream. I stated my intention to deposit £20,000. I did not ask for an overdraft facility. I was rejected and my attention was drawn to the Experian Credit Report Agency. I checked my page. According to Experian, I was not on the Electoral Register. Yet, I voted in every national, regional, referendum and local election for the last 18 years at my present address. I sent Santander my voting card for the 2016 Welsh National Assembly election. I was rejected again quoting undisclosed criteria that are not published. Several years ago, I took out a loan from Santander over 2 years. I did not need the offered 3 years. Every payment was on time and the account was closed on time. There is nothing in my excellent credit history to bar me from a 123 account. I can only make the following assumptions: 1. I am too old to offer good long-term business to Santander. The bank is age-prejudiced. 2. My intention to deposit £20,000 is not what Santander wants. The interest rate is offered up to £20,000 as a recruiting gimmick, that it does not really want to fulfil. It wants customers who are more likely to want credit and pay interest not collect interest. In support of that, I was instead offered a Santander ordinary current account that does not pay interest on balances. I am indignant and angry.0
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I feel honour-bound to put the record straight after my posting of complaint about Santander and my rejection for a 123 account. I now withdraw my former incorrect assumptions about Santander marketing policy.
I made my complaint to Santander and initially it wrote to say without giving a reason, that I had not met their current criteria. I persisted and entered a telephone conversation with a Complaints Manager. He agreed to give a definitive reason for my rejection. First he needed to speak to the underwriters.
It was a case of the "Computer said NO". My Experian Credit Reference page had 2 serious mistakes upon it. First, I was incorrectly deemed to be not on the Electoral Register. Second, my Welsh address was written in 4 different ways. There were misspellings and words in the wrong order. Apparently, Credit Reference Agencies get this information from firms that one deals with. Every time a mail order company or other gives up its input data to Experian, it is recorded whether it it is correct or incorrect. Any numpty could see that my address in all 4 examples was the same address. Computers do not have reasoning and see a different spelling as a different address.
I now have a Santander 123 account.0 -
Martin's Blog:
"However this only works if this is the account you pay all your bills from – so shift them to here."
How would Santander know this information?0 -
this may be a stupid question but is it better to pay off capital on my mortgage at 1.2% or save with Santander at 3%?0
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this may be a stupid question but is it better to pay off capital on my mortgage at 1.2% or save with Santander at 3%?
Depends on your outstanding amount. Santander 3% is only up to £20k balance. Thumb rule is that if you can get a better return (not % but absolute figures) then go for that option.Happiness is buying an item and then not checking its price after a month to discover it was reduced further.0 -
Depends on your outstanding amount. Santander 3% is only up to £20k balance. Thumb rule is that if you can get a better return (not % but absolute figures) then go for that option.
I agree. I have a Santander Mortgage at 2.49% which I could pay off if I had to, but the capital is in a mix of savings and investments and giving me a net return of 4.8%, so I'm in no hurry to pay off my mortgage.
I would just add that you should also max out the higher interest current accounts such as Club Lloyd's at roughly 4%, TSB at 5%, etc.0 -
I am of similar age and also live in Wales. I had the same address and electoral roll problems. After sorting those, I still had difficulty because the bank account I was moving from was set up before 1998 when I think it was the Data Information Act prohibited the banks from providing credit reference agencies with account information, without the permission of the account holder. Hence, I had no existing bank account history. Furthermore, I am an additional card holder with my husband on his credit card account. Again, for credit reference agencies, this is irrelevant and doesn't appear on my record. I persevered and did succeed in the end; the day that my 123 account was opened, the interest rate reduction was announced!:):(0
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