RogerBW's Blog

The Sloshing of Money 05 July 2015

Interest rates everywhere are quite low at the moment. But there's a (legal) method that can get a 5% (pre-tax) return on up to £9,000, and 3% on a further £21,000.

That trick is current accounts: in their attempts to take customers away from each other, many banks are offering significant interest rates on balances up to a few thousand pounds. There are restrictions on how many accounts one has, and most of them are trying to be one's only account and so require things like a regular salary deposit, but there are four banks which don't have that latter restriction.

Nationwide FlexDirect pays 5% on balances up to £2,500 if you pay in £1,000 a month (but only for the first year); you can have two accounts there, if one of them is joint. You will have to present proof of identity, by post or at a branch; when they say that a passport is enough and you don't need to bring separate proof of address, they're lying. (They also supply a PIN entry device; it's a very cheap and nasty piece of kit.)

TSB Classic Plus pays 5% on balances up to £2,000 if you pay in £500 a month; you can have two accounts there, if one of them is joint, but their on-line application system can't cope with joint accounts so you may need to go in to a branch.

The Bank of Scotland pays 3% on balances between £3,000 and £5,000 if you pay in £1,000 a month; you can have three accounts there. (A quirk: your account has to be allocated to a specific branch, and they don't have any outside Scotland, but as far as I can see you'll never need to visit it.)

Tesco Bank pays 3% on balances up to £3,000 if you pay in £750 a month; you can have two accounts there. (A catch: a "month" is a statement period, starting on the date the account was opened, not a calendar month as with the others.)

All those "pay in" restrictions include transfers from other accounts (as long as they aren't with the same bank). So all you need to do is set up standing orders to move money from one to the next each month. This is slightly fiddly (I have eighteen separate instructions on nine different accounts) but once set up will simply keep working; all you have to do after that is transfer out the interest.

Tags: real life

  1. Posted by Owen Smith at 01:18pm on 05 July 2015

    Santander 1-2-3 bank account gives 3% interest on up to £20,000 and is a lot less faffing about. They do require a large monthly deposit (meant to be your salary I'm sure) and some direct debits. There is a monthly account fee, but direct debits for utility bills get cashback and mine more than cover the monthly account fee.

  2. Posted by RogerBW at 08:51pm on 05 July 2015

    When I looked into it, it seemed as though the deposit and direct debits had to be to/from commercial sorts of account, rather than other personal/retail ones. Well worth it if that's not a problem, of course.

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