Current accounts - an alternative home for your savings
Andrew Hagger, head of news and press at Moneyfacts.co.uk, the money search engine comments
“Over the last couple of years we’ve seen the emergence of more current accounts offering high credit interest rates, some of which are on a par with the top paying savings accounts.
“Traditionally, people keep their current account for managing their day to day finances and maintain a separate savings account, often with a different institution, in which to hold their savings balances.
“Abbey, Halifax and Alliance and Leicester all currently offer current accounts with an AER in excess of 6.0%, a rate you won’t find offered by any instant access accounts on the market at the moment. For example Anglo Irish is offering 5.55% on its easy access deposit and IceSave offering 5.70% on its internet savings account.
“The only downside with the Abbey, Halifax and Alliance and Leicester deals is that, whilst they are fine for earning some much needed extra interest on your current account, the high interest rate only applies to balances of up to £1,000, £2,500 and £2,500 respectively, and as such aren’t really large enough to make them an attractive option for the more serious saver.
“In fact if you do keep balances in excess of these figures, you will receive only 2.5% on the Abbey account and a mere 0.1% with Halifax and Alliance & Leicester. Therefore the more you save over the high interest rate maximum, the more you are in effect, negating the value of the initial high interest rates on your overall savings balance.
“There are on the other hand a couple of other interest paying current accounts on the market that may appeal to someone looking to combine an element of savings with their current account.
“Coventry BS offers 5.85% (5% from year 2 onwards) on up to £250,000 with its First account, and Norwich and Peterborough BS offer 4.85% on balances up to £5,000 with its Gold current account.”
Edward Sadler, Head of Product Marketing at Coventry BS comments:
“People are obviously drawn by some very seductive rates that are being offered but they really must check that these high rates apply to all the money in the account. In many cases, you really don’t have to have that big a balance to lose out and there’s a real danger that consumers may miss this key point. “
Andrew Hagger of Moneyfacts.co.uk continues:
“Whilst keeping your savings and current account monies in the same basket will rely on a bit of financial discipline from the account holder, at least you don’t have the issue of not being able to get instant access to your savings or having to wait three or four days for transferred money to arrive in your current account.
“Although maintaining two separate accounts may be the option that many people still currently prefer, consumers are becoming more sophisticated with their finances as the emergence of current account mortgages and offset mortgages has shown. Who knows, in a few years time, the combined current/savings account may be equally popular and provided by a wider range of institutions.
“The table attached shows how much you would receive if you maintained a balance of £6,000 in your account for a full twelve months, and as you’ll see it is the high interest limit that makes the difference in this example, rather than the headline rate.”
Current Account Comparison Table 26/07/2007
NOTES TO EDITORS:
Moneyfacts Group
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