Fed up of low interest rates on savings? I get nearly 5% on mine. Here’s how you can get the most interest on your savings too.
If you’re like most Brits you’ll have a current account with the bank you joined as a kid. Chances are you’re earning no interest on any cash in there. If you’ve an Isa / Nisa or savings account you’re unlikely to be getting much higher than 1.5% AER. It doesn’t have to be that way.
A month ago I wrote my Be Clever Basics guide to current account stacking. As it explains, you can earn much better rates by spreading your savings across a series of high paying current accounts! It might seem a little complicated, but it’s actually pretty easy.
With just the accounts below and an eventual target balance of £19,600 (we’re saving each month for our wedding and emergencies!), we’ll earn £742 in a year after tax. That’s just under 4.8% AER (3.9% after tax). Plus there’s a possible £300 in switching bonuses to add to the pile, and some cashback. The same in a 1.5% AER NISA would only earn £294. That’s a decent amount of money to put in our wedding fund.
Here’s how I do it.
At the moment we have 10 current accounts between us, most of them to earn interest.
Stacking them is a gradual process. We’ll open the accounts when we have enough to pay in.
Here’s what we’ve done and the plan as we save more.
1. I switched accounts to Halifax
I switched my Barclays current account to Halifax Rewards. I got £100 for switching and as long as I pay in £750 a month and have two direct debits I also get £5 a month – even if the balance is zero. That’s £160 in year one!
2. I opened a Santander 123
I then opened a Santander 123 account. I transferred all but two direct debits so I could take advantage of the cashback. My salary is paid here and I use it as my main account.
As long as my balance is above £3,000 and £500 enters the account each month, I’ll get 3% AER. A year of £3,000 is worth £72 after tax. The same in a best buy 1.5% NISA would earn £45.
You can earn 3% up until £20,000, though I’m aiming to keep this one at around the three grand level. There is a £2 monthly fee, though cashback on bills always covers that (and makes a little extra too).
3. We opened four TSB Classic Plus accounts
After waiting a month we both then opened a TSB Classic Plus account each. With this one you can save £2,000 and get 5% AER interest. Until recently you could have two each, so over the next few months we opened them too. That means for that £8,000 we’ll earn £320 in a year rather than £120 in a NISA. You only need £500 paid in each month and no direct debits.
We’ve got a standing order that moves the same money between them on a monthly cycle, so rather than paying a total of £3,750 individually into each one and out again, we only need a max of £1,000. It starts in Santander, goes to Halifax, then through all the TSBs then back to Santander.
4. I sent money to a First Direct Regular Saver
I’ve also got a First Direct account for my mortgage, and through them I’ve a Regular Saver which pays 6% AER. I pay in £300 a month and at the end of 12 months I’ll transfer that and the interest into my Santander. On the final balance of £3,600 it’ll earn around £90 as opposed to £54 in a NISA.
If you’re not already banking with them, you can get £100 for switching, so it’s worth considering.
5. We’re going to open two Nationwide accounts
Next up will be a Nationwide FlexDirect account each which gives 5% AER for one year on a balance of £2,500. Those two accounts will earn a combined £200 rather than £75. At the end of the year we’ll probably switch it to a bank like Co-op or M&S which offer £100 switching bonuses.
If you’ve more money
This isn’t the only way to stack current accounts, and some other ways could bring a little bit more. But they work for what we already had and the amount we hope to be able to save each month.
If you’ve more money to save, the next account I’d go for is a Lloyds Club. This pays 4% AER on balances between £4,000 and £5,000. You do need to pay in £1,500 a month but you can get some freebies such as cinema tickets.
After that you can work towards the £20,000 limit in the Santander. A second account is also possible if it’s joint.
Plus Tesco Bank gives 3% AER on balances up to £3,000.