Tuesday, 3 November 2015

Earning decent interest on your savings, Part 1: 5% current accounts

This isn’t financial advice; your mileage may vary, don't trust everything you read on the Internet, etc. If you go overdrawn, this is not for you!
These are not accounts you want to be going overdrawn in, but, if you have some cash earning a pittance of interest, spend 30 minutes applying for accounts online, and 20 minutes after they are active to set up some simple automatic standing orders and your direct debits, and you can get yourself some decent interest and make use of the new £1000 (or £500) tax free interest limit! All through accounts covered by the FCS guarantee (MoneyWise, Telegraph and various other sites have published similar lists).  Follow me, if you will … the links in this post don't earn anything other than the warm fuzzy feeling that you too are getting paid decent interest for a change.

All the switching suggested in the initial post I wrote has been done. So my current set up is:

Starting balances:

Lloyds: at least £4000, no more than £5000 (4%), 2 Direct Debits
TSB Classic: keep at £2000 (5%)
S123: at least £3000 (3%), maximum £20,000 (all other DDs, at least 2)
optional TSB Joint (joint can't be set up Online):  £2000 (5%)
optional Halifax: enough to cover Direct Debits (£5 per month) 2 Direct Debits

Standing orders and direct debits to set up:
Day 1: S123  £1800 ->  Lloyds Club (2 DDs approx £50)
Day 3: Lloyds    £750 ->  Halifax (2 DDs including credit card, approx £500).
Day 3: Lloyds    £500 -> TSB classic
Day 3: Lloyds    £500 -> TSB Classic Joint Account
Day 6: Halifax  £200 ->  S123.
Day 6: TSB Classic  £500->  S123
Day 6: TSB Joint   £500 -> S123

Annual interest earned: Between £410 and £960 
S123: between £90 and £600 (less however much of the monthly fee your DD cashback doesn't cover)
Lloyds: between £160 and £200 (£4000 to £5000 balance)
TSB: £100 per account (£2000 balance)
Halifax: £60

Old article with links:

You can mix the start and land points up but mine goes like this to the most of direct debits:

Salary paid into Santander 123 account (pays 1% for  balances >£1000, 2% for >£2000, 3% on the entire balance if it's over £3,000 and up to 20,0000) direct debits pay cashback of 1, 2 or 3%. There’s £5 monthly account fee (cashback calculator: http://www.santander-products.co.uk/banking/calculator/123ca.html ). I set my biggest direct debits in this account for the cashback value. Minimum requirements: £500 per month paid in, at least two direct debits paid out. This one only really pays out if you use have your utility direct debits paid out of it to off-set the monthly fee.

Standing Order 1: On the 13th: £1000 paid in to NationWide FlexDirect from S123. NationWide Pays 5% interest on balances up to £2500. The trick is to try to keep the balance at £2500 and sweep extra back out to another account.
Minimum requirements, pay in £1000 per month. Must go paperless. Only pays 5% for first 12 months: ditch this account and find another after 12 months. 

Edit: An alternative to this account, that I've now switched to after the end of the 1yr bonus at NW, is Lloyds Club. It pays 4% on balances between £4,000 and £5,000, and you get some free cinema tickets.  You have to pay in quite a bit to this one: £1500 per month, and you must set up at least 2 direct debits.

Standing Order 2: On the 15th £1005 (ish) paid in to TSB Classic Plus from NW. Pays 5% interest on balances up to £2000. Again trick is to keep the balance at £2000 sweep any extra into follow on account.
Minimum requirements, pay in £500 per month, must choose paperless.

Standing Order 3: On the 18th pay everything else back into S123 account, a total of £1010. So I’ve swept through at least the minimum amounts for each account, left excess in there for the least amount of time and swept up the interest back into S123.

In summary:
You can have up to £4500 being paid interest at 5% (the eagle eyed, will spot you don’t get compounding, so have to move the interest out monthly), and get the cashback from Santander, and any other money at 3%.  You can also open up a joint account with TSB for another £2000 at 5%, and the same goes for Lloyds too. 

I'll shortly be adding the Lloyds account which pays 4% if you have between £4,000 and £5,000 (and gives you 6 free cinema tickets per year) as the NationWide offer is coming up to  the end of the 12 month bonus. I'm going to use the Halifax switching service to switch out of the NW for which I'll get £125 one off switching bonus and then £5 per month for staying in credit, having two direct debits paid out and paying in £750 per month. I'm also adding a joint account with my partner at TSB for another £2000 at 5%. That means I'll have to set up a new merry-go-round of standing orders, but it's easy, and oddly satisfying.

Where you have accounts with a balance at the maximum limit, you should sweep the monthly interest into S123 as it won't be earning any interest above the maximum amounts.

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