Moving bank accounts every year to get extra interest on saving accounts?

[Tempest]

This is not something I've ever done, but I was just wondering, does anyone do this and can you "get away with it" even if you tried?

It seems you can get another 2% or so of interest for the 1st 12 months when you move to a new bank account.

Is it a common practice of anyone to do this, then when the 12 months are up and the (for example) 2.8% reverts back to say 0.5% for the next year, you take your money out and open another saving account with a different back for their 12 months special rate?

Perhaps every 5 or 8 years coming round the the 1st bank again.

Is such a thing do'able?

[Pheonix]

Do it with My ISAs all the time...

[cjanderson]

yes, do it with my isa's and my non isa saving account - Egg was doing 3.25% for 12 months, then went to 1.25% so moved to AA Savings for 2.85% (inc 2% bonus for 12 months)

but its very simple to change a savings account - open new one, stick money in, leave it. Current account nope, too much hassle to move any DD's plus its not worth it, as the balance in the account is low.

[Tempest]

Thanks for the replies. Can't really be bothered with doing ISA's at the moment due to small amount you can put in (in a lump) and fact interest rates are so low, the extra you make in not paying tax on your savings is almost not worth worrying about.

In saying that, I've not had ISA's for many years, if you over time build them up, and you move them, do you move them in the whole chunk, the whole amount, you don't have to start with the 1st years limit again when you move?

As per my original question, no. I was not thinking of changing current account around, as you rightly say way to much hassle moving DD's etc. I was just talking about savings accounts.

At the moment I am with Cahoot which, when I opened the account a few years ago was paying around 5% when everyone else way paying something stupid like 1 or 2% on instant access savings.

Since then it's dropped to a criminal 0.5% or something like that, and I can get 2.8% for 12 months just by moving to ing direct, which works out as a lot of money for nothing, so I'm an idiot leaving savings in Cahoot am I not?

[Pheonix]

With the ISA thing, don't think about it over one years period. Yes right now interest rates are quite low, but if you use your full ISA allowance over 10 years that'd be 30k odd, then suddenly the tax liability becomes more of an issue. Ditto if interest rates go up.

In moving them, you do not start your allowance again; so long as you use the official transfer procedure... Can't stress this enough, do NOT remove the money yourself manually and try and put it into a new ISA. This will remove the funds from the tax free wrapper and you'll have to use this years allowance to get them back in.

The good news is the transfer process is easy, an the new ISA provider will normally provide you with a form/option online on setup. The only exception is where some ISAs (for whatever reason e.g commercial) don't accept prior years subscriptions. But then, just find one that does!

Also, the cash ISA subscriptions limit is rising to 10k (in a financial year) from April 1st so if you can't be bothered this year, it will be even more worth it from the next.

Generally speaking I think they recommend:

- Pay off expensive debt
- Put money into your ISA limit
- Overpay mortgage

Hope that helps!

[cjanderson]

do you mean

can't be bothered with an isa, shall save elsewhere? or can't be bothered with an isa, so shall spend it?

as phoenix says, 10 years of isas/tessas could mean 40k saved up. i move mine each year (and take out new one with a higher payer that doesn't allow transfers in, then merge that with rest of the pot at transfer time)

its a no brainer to move savings around, though if we are talking £1k, then you get £28 rather than £5 in interest if you moved elsewhere, before tax. so maybe not worth it if you need easy access to it (ie you can get instant access to cahoot via your debit card, whereas a saings account you'd have to transfer the money to another account to get access to it, could take 1-3 days)

[Tempest]

When I said about the Can't be bothered, it was about saving elsewhere due to the amount extra you get.

I recall when ISA's 1st came out I had one, Interest rates were pretty high, perhaps 8 or 10% (I'm guessing) but when the tax free status is was a good thing.

When you are looking at starting off with around 5K and you get 3.2% as opposed to say 2.8% in a normal 1st 12 months bank saving account, we are looking at like £20 difference for the year for locking your money in an ISA.

That's why I made the comment, can I be bothered.

I appreciate this builds up, but seemed easier to just give up the £20 and simply have a savings account.

Which is why I originally asked about the practicality of taking advantage of the "1st 12 months special deals" on saving accounts at the moment.

Such as these: http://www.money.co.uk/savings-accounts.htm

Seems a bit stupid now that you can get around 3% at best from a savings account, of you can lock your money away for 5 years and get 4.4% from someone else. Those numbers don't exactly excite me I must admit.

TBH, I'm thinking about a few K in some premium bonds.

[kaneda]

Why not open the ISA with a nominal sum, transfer as and when you feel you have funds that you can "lock" away. If you do have to withdraw then so be it, but at least you have the option of carrying it over. Some ISAs are not entirely locked in and can be operated as a saving account. The only limit is the amount you can save each year, at which point you can have a different saving account to hold the excess.

It's better to see the ISA as a long term, tax free investment vehicle. Each year you do not use your ISA is another allocation of tax free savings.

It's a crying shame people in the UK/US take such a short term view for finances.

[cjanderson]

but its 3.2% TAX FREE in an isa, versus 2.8% TAXED (so take off 20% or 40%) in a normal savings account.

Always do isa's for amounts you want to save long term, versus normal savings, as its tax free and usually slighlty higher interest rate. Why do it at a lower taxed rate? makes no sense really.

[rbullivant]

I get 2.8% in a Halifax ISA, its as accessable as any money I have. I can transfer in and out online, the rate is only for one year though. But it is tax free. I only just started it as a new house wiped out our savings, but its better to use the allowance than not, if it stays in there it'll build up, if it comes out I've made a decent interest rate tax free

R

[rezabelady]

Probably best to go with an ISA as already advised if you're not using your allowance, but if not it might be worth just calling up your bank and asking what they can offer you.

The bonus period on a Alliance and Leicester savings account just expired the other week so I called up Santander up and asked what they could offer. The guy just opened up a new account with the same bonus and transferred across the funds in about 10 minutes. When I spoke to Halifax about their Web Saver Extra they actually advised me (incorrectly as it turned out as there is no bonus period) to close the account and start a new one after 12 months.

[DVDWotcha]

I have to say this 12 month incentive business it starting to really get up my nose....

[cjanderson]

well its better than NO incentive, and low rates all the time.

[rbullivant]

The alternative is to receive slightly less than the base rate, which I was receiving under my old ISA. To be honest with needing a new car and new house, I've never really been in the situation where I need to switch accounts

R

[Tempest]

I have to say this 12 month incentive business it starting to really get up my nose....

Agreed, that's the whole problem with many industries today, they don't give a toss about the loyal customer. All they want is new customers.

I believe some things are changing a little, with phones I believe at least. Used to be you would do better to leave them and join as a new customer to get a free phone, loyal customers did not get free phones, only new ones.

As with banks. New customers should get low rates from everyone, and over time, you should get higher rates as a reward for staying with them.

Virgin media (and others) are the same, Join now and you get a super discount for joining, hang on, I've been with you X years, where's my discount.

It's a funny old world. At least the car insurance industry has not gone down this path thank god.

Loyalty..... Whats that?

[rbullivant]

They rely on people not being bothered to change their bank, probably works to be honest. A few people are careful, but I imagine many don't know how much interest they even get