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Sunday, June 16, 2013

Maximise your savings... with a current account


moneysupermarket.com

Anyone looking to build up their savings pot will no doubt feel exasperated right now. Savings rates have remained pitifully low for the past few years and no signs of improvement are on the horizon.
In contrast, competition in the current account market has stepped up a gear, with many banks and building societies now offering better rates of interest on their current accounts than on their savings accounts. As a result, it could pay to be a little more creative about where you stash your cash.

Get switching

Although many of us regularly switch savings accounts, the same can't always be said when it comes to current accounts.

In fact, research by First Direct found that 44% of UK adults have never switched their current account and a further 27% have only moved bank accounts once.

Other figures however, suggest this is starting to change. Nationwide Building Society recently revealed it has opened 365,000 new current accounts so far this year, with a record 123,000 customers switching their main banking relationship - that's a staggering 58% rise on the year before.

But should you need a little convincing as to why it's worth switching your current account, we've highlighted some great reasons below...

Switch to get a better rate of interest

According to First Direct's survey, more than a third (34%) of respondents claimed they would be more likely to switch current account if a better interest rate was available. If you fall into this category then there really is no excuse for not switching as a number of current accounts now offer extremely competitive interest rates and could make a great home for your savings. Just take a look at the following:

Nationwide FlexDirect Current Account: Pays an annual equivalent rate (AER) of 5.00% fixed for 12 months on balances up to £2,500. Basic rate taxpayers maintaining a balance of £2,500 for one year would receive total interest of £100.

Given that the best rate of interest you can earn with an easy access savings account right now is 2.00% with Nationwide's e-Savings Plus account, it's clear to see why the FlexDirect current account is worth snapping up. Don't forget that because it's a current account, you'll still have instant access to your money. In comparison, the e-Savings Plus account only permits five withdrawals per year and you'll need to be a Nationwide current account holder to qualify.

Even if you are happy to lock your money away for five years, the best-paying fixed rate bond, from Agribank, pays only 3.60% AER and you'll need a hefty deposit of £10,000. Bear in mind also that this provider is not covered by the Financial Services Compensation Scheme.

What to watch out for: To benefit from the FlexDirect Account's 5.00% rate, you will need to pay at least £1,000 into the account each month. Remember that you won't receive any interest on balances over £2,500 and after 12 months, the interest rate falls to 1.00%.

You can read more about the Nationwide FlexDirect current account here.

Santander 123 Current Account: Especially suitable for those who regularly keep larger sums of money in their current account as you'll get as much as 3.00% on balances up to £20,000. This is broken down as 1.00% on balances from £1,000, 2.00% on balances from £2,000, and 3.00% on balances between £3,000 and £20,000. Again, this is far better than most savings accounts pay and, unlike the Nationwide FlexDirect account, rates don't expire after a year.

But there's another benefit to this account as you also will receive cashback on some of your direct debits which leave the account. You will earn 1.00% cashback on your water bills, council tax bills and Santander mortgage payments, 2.00% on gas and electricity bills and 3.00% cashback on mobile phone, home phone, broadband and paid-for TV packages.

What to watch out for: You will need to pay £500 or more into your account each month and there is a monthly fee of £2.

Lloyds TSB Vantage Current Account: Interest rates are tiered depending on the size of your balance. Balances of between £1 and £999.99 earn an AER of 1.50%, balances of between £1,000 and £2,999.99 receive 2.00% and balances of between £3,000 and £5,000 receive an AER of 3.00%.

What to watch out for: You will need to pay £1,000 or more into your account each month and no interest is paid on balances over £5,000.

Halifax Reward Current Account: Rather than receiving interest, you will be paid £5 every month. And if you switch to the account before July 7, you will receive £100.

What to watch out for: To receive the £5 reward, you must pay £750 or more into the account each month and pay out at least two direct debits.

Switch to get access to better savings accounts

Of course, there are many more current accounts that don't pay interest, but some are still worth considering as they will instead give you exclusive access to more competitive savings accounts:

M&S Premium Current AccountOpen this account and you'll qualify for the M&S Monthly Saver which pays a competitive AER of 6.00% fixed for 12 months. The account is ideal for those who save regularly as you'll need to pay in between £25 and £250 a month.

The M&S current account could also be right up your street if you're a keen M&S shopper as you will receive a £100 M&S gift card and 20% off your M&S shopping for a year. Plus you'll earn M&S loyalty points with your debit card in M&S, a birthday gift worth £10, and stacks of vouchers to spend in store.

What to watch out for: The M&S Premium Current Account costs £15 a month. If you'd prefer to have worldwide multi-trip travel insurance included, you'll need to pay £20 a month.

first direct 1st AccountApplying for this current account means you'll be able to save into the First Direct Regular Saver Account which also pays 6.00% AER for 12 months. You'll need to pay in £25 to £300 a month.

Not only that, but if you switch to the 1st Account you will receive £100 for your trouble. The account is also a good option if your biggest bugbear is poor customer service. First Direct is renowned for its excellent customer service and will even give you another £100 to leave the bank if you're not happy.

What to watch out for: You must pay £1,000 or more into the 1st Account each month or hold another First Direct product such as a mortgage or savings account (excluding the regular saver).

Switching is to get easier

If you're still not convinced about switching current accounts, perhaps news that from September the switching process will take no longer than seven days, will persuade you. You can read more about this in Mark Hooson's article.

But the existing switching process is still relatively straightforward and waiting until September could see you miss out on some of the best deals - so don't delay, get switching today!
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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