Tell me about savings accounts and interest rates!

[mrk]

Up until now I've only really had one account (discounting a building society account which has zero rewards or offers so I transferred everything out of it ages ago) I do everything from, banking, savings, transfer monies etc (purchases are done with CC and paid back from the main account).

I just thought about taking some of it out and putting it into a savings account to benefit from some of the new rewards they have on offer at most banks.

Reading about it I'm still a tiny bit confused, basically I am trying to find the catch if there is any, I'm no banking guru, I'm just person 12345 using the money I make each month on bills, expenses and purchases whilst saving the rest I notice many places offer high interest rates with rewards if you make no withdrawals each month so basically you're getting free money based on x percent of what is sitting in the savings account at the end of that month.

My math is not as good as it used to be but say for example you transferred £4k into a savings account offering 4.10% interest (not gross) I figured that after a typical month the total would be based on the following calculation:

Current balance in savings account divide by 100 multiplied by interest percentage = A
Then
Sum of A and interest percentage = B (Total interest at end of month)

So £4000 / 100 * 4.1 = £164
£164 + 4.1 = £168.1
= £4168.1 in your account at the end of that typical month

Or is this completely wrong?!

I ask here because I just got notified of a new reward scheme by my bank when logging in online and you apply online too.
Does anyone else have such an account for long term purposes ?

Sounds like a nice way to have some extra free cash put into your account each month !

 

[Haircut]

That 4.1% is per year.

In one month you'd earn 4000 * (1.041 ^ (1/12)) in interest and end up with £4013.62 in your account at the end of the month.

(It will likely be a few pence off from this as they will generally calculate interest rates per day rather than per month)

 

[mrk]

Hmmm not as spectacular in reality as it sounds on the notification then :| cheers for clearing that up!

 

[carlazai]

It gets better when you save over the years. Saving is a pain in the ass for the first two years but then you start to see increase your monthly income. This increases throughout your life, so hopefully i will bring in an extra £1000 a month by retirement if i carry on at this rate. It will only get better if i save more

 

[Majago]

(discounting a building society account which has zero rewards or offers so I transferred everything out of it ages ago)[/QUOTE]
Depending on the building society in question, it's not a bad idea to be 'carpetbagging' at the moment.

e.g. The Chelsea are in the process of tying up a deal with the Catholic and all member of the Catholic will end up getting about £400 each for the priviledge.

The only downside is that some (most) Societies are wise to the ploy and will only pay out to customers who've had accounts for x years etc.

 

[mrk]

See the thing is I just can't be bothered to save sometimes, I need some kind of incentive to save like "at the end of the month i'll gain extra £££ so need to save to get this benefit!" and so on so was hoping the Op was what it was I guess I'll have to keep in thought the future benefits then and just go for it and slowly buildup the deposits into the account over time!

Thanks all

 

[Cobertizo]

Read some of the savings-related articles on here: www.moneysavingexpert.com. Starting here: http://www.moneysavingexpert.com/savings/which-saving-account

I would definitely support the idea of putting some money into dedicated savings accounts, rather than just leaving it all in a current account (which generally don't give you much interest, with a few notable exceptions). It's free money, and keeps you ahead of inflation (if you pick an account with a high enough interest rate).

Be aware that 4.10% gross per year isn't a great rate though - you can do much better. Again, MoneySavingExpert is very useful for identifying the accounts with good rates.

One other thing which you might like to consider if you put all of your spending onto a credit card is something like the following: when you get paid, work out how much of it will be going out in direct debits / standing orders, and how much cash you normally get through in a month, then transfer the rest (less any savings, which you have creamed off into a proper savings account) into an e-savings account connected to your current account. This is then a chunk of money set aside to cover your credit card spending, but between the time when you earned the money and the time you need to pay the bill, it's sitting in a higher interest account earning you a little on the side! Obviously, just before the credit card bill needs paying, you need to put enough money back in the main account to cover the payment, but this way means that you have as little money as possible sitting in a low interest current account at any one time.

 

[mrk]

Looks like a long read so will check them out when I get home tonight- cheers for the advice!

 

[Mad old tory]

Always start with an ISA as it's tax free and so the actual interest you receive is a lot higher than a standard savings account.

 

[Col_M]

I spoke to my Czech bank the other day about a high interest savings account and the best they could offer was 1.4% Gross, I laughed. The products and services Czech banks offer are shocking.

I really wish I could have my Natwest accounts over here