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A new current account and linked accounts from HSBC offer up to £198 in extra interest payments over a year. Should you get one?

I’m a big believer that loyalty rarely pays in the banking sector, so if you can get a better deal with your current account elsewhere it’s worth looking in to. You can get switching bonuses, cashback and high interest  – read my 6 ways to make your bank pay you article for more details. So how does this new account measure up?

Pros

Open the HSBC Advance Bank Account and you’re eligible to open two customer only savings accounts.

1. High interest ISA

The first is the HSBC Loyalty Cash ISA. You get 1.5% AER which is good for instant access ISAs but not great compared to some current accounts from other banks. However, as long as you pay in a lump sum of £300 or a monthly payment of £25, you’ll have the account topped up by £10 every month for the first year. That’s a free £120.

If you miss a month, you won’t get the tenner for that month. Also, the 1.5% interest on the ISA will drop to 0.5% AER after the first year.

If have you already have an ISA with a low rate, you can transfer that money in. Read my ISA basics for a little more info.

2. High interest regular saver

You’ll also be able to open a 6% AER Regular Saver (it’s normally only 4%). This accounts let you pay in £250 every month for 12 months. If you do that for the whole year you’ll get £97.89 interest before tax on a final balance of £3,000, which is the equivalent of 3.26%.

It’s not a bad rate if you are saving month by month, though if you have a lump sum you can get better elsewhere.

In total that means at the end of a year you’ll have made around £198 in interest on £3,300 of cash, which works out as the equivalent of 6% after tax! Pretty good.

3. You don’t have to switch

Some accounts only give the free cash if you’ve switched and closed your old account. Here you don’t need to, so you can just open one as an extra account.

Cons

To get the HSBC Advance account you need first to pass a credit check (though that’s the case with all new accounts).

You also need to pay in £1,750 every month. That’s roughly an annual salary of £26,500 being paid in every month.

However you don’t need to keep that money in there. You can transfer it straight out again into another account (or to pay your rent and bills!) and have a balance of zero.

So is it any good?

I think it looks like a decent way to get some free cash, and all you need to do is remember to pay in the monthly minimum. I’m certainly going to sign up for one.

At the end of the 12 months I’ll either close it down or switch it to a bank that offers a £100 switching bonus!

There are lots of other accounts you can chose from though, so if you’re only planning on opening one you might be better with one of those.

Also I wouldn’t switch to this account. Halifax have a deal right now with a £125 bonus and £5 a month in interest. That’s going to be a lot easier!

How to get in the savings habit, get the best interest rate and make sure you stick to it.

If you’ve been following these fix your finances posts over the last few weeks you’ll have a good sense of where your money is going and hopefully have also started reducing the cost of any debts. The next part is to focus on savings.

Savings might seem out of reach – various reports state most people don’t have much put aside, but there are some simple things you can do to help you get in the savings habit. Even managing to put aside £30 a month thanks to these tricks can make a big difference in 12 months time.

Work your way through each of these steps and you should be able to improve not just how often you save, but also how much money you make as a result.

1. Work out how much you can save and why

This is the first thing you need to do. Check what’s left each month after you’ve paid for the essentials, and work out how much of this amount you want to have for other spending and how much for savings.

It’s worth thinking at the same time why you are saving, perhaps even having a savings goal. This can really help motivate you.

2. Keep your savings separate to other money

If all your money is in one account it can be difficult to keep track of how much you’re saving up, and its easier for that money to be spent on everyday purchases. So set up a completely different account to store your savings.

3. Prioritise your savings

If you only save at the end of the month, you’re more likely to spend the cash elsewhere. Instead move the money immediately after payday into your separate account.

4. Pick the best account for you

This can be a simple savings account – but you won’t get much in interest like this. Likewise ISAs aren’t much use to most of us now because we can all earn a decent amount of tax-free interest in other accounts. Others can pay much more though. Here are a few options:

You want the highest interest

The best rates right now are with current accounts. You can have as many of these as you want with different banks, though individual banks might limit how many you can open with them. Right now the highest paying ones are:

• Nationwide FlexDirect – 5% on savings up to £2,500 for one year
• TSB Classic – 5% on savings up to £1,500
• Tesco Bank – 3% on £3,000 (you can open two accounts)

You don’t have a lump sum but want to save every month

I love a Regular Savings account. You can get as much as 5% interest on monthly deposits for 12 months, with the interest paid and account closed when it reaches the end of the first year. You can then set up a new account and start again.

You are limited as to how much you can save each month, usually around £250 or £300, but that’s great if you are gradually building up savings and you don’t need to access the money for a year. The highest paying Regular Savers at the moment, which also require you to have a current account with the bank are:

• First Direct – 5%
• Marks and Spencers Bank – 5%
• HSBC – 5%

If you’re not with any of the banks listed here or above it’s worth looking to see if there are other incentives, such as a £100 cash bonus, to get you to switch.

If you’re saving for your first home

Open up either a Help to Buy ISA or a Lifetime ISA. You’ll get a 25% bonus on savings, as well as the set interest rate, when you buy your first home – though do read up about the restrictions.

If you’ve got a lot of money

The options above don’t work for anyone with hefty sums put aside. If you don’t need to access the money then you should probably consider investing some of the money. It’s a risk, investments can fall as well as rise, and I’m no expert, so you should do plenty of research to decide if it’s for you.

Alternatively, you could look at an easy access account such as the one from Marcus, currently offering 1.5%. This is below inflation but better than you’ll get elsewhere.

5. Automate your savings

There are ways to make saving a lot easier too.

Set up a standing order to move your wedge of cash and you won’t forget to do it. This is really useful for regular savers.

You can also link your bank account to a smart app such as Chip or a Facebook Messenger bot such as Plum. They use algorithms to analyse your spending habits and decides how much you can afford to save. That amount is automatically moved into a savings account. Chip, in particular, is good as you can start off with 3% interest for the first year and earn as much as 5%.

Or you can see if your bank has a “top-up” feature. Banks including Lloyds and Monzo do this. When you spend money on your debit card, your account will round-up transactions to the nearest pound. So spend £1.30 and 70p will be moved to a separate pot.

Chip app review – Can it help you put money into savings?

The best bank switching, cashback, interest & overdraft offers (May 2021)