Earn > Bank Interest

Let the banks pay you

You will either be someone who pays interest to the bank, or someone who receives interest from the bank. If you are currently paying high overdraft fees or high credit card interest rates check out our pages on current accounts and credit cards to see if you may get a better deal elsewhere.

If you are looking to earn more interest on your money, this is the place for you!

Loyalty doesn’t pay

The majority of current accounts do now offer some form of reward, whether it be a 1% interest rate or free cinema tickets. However, millions still keep their cash in a current account which earns them nothing. This may be acceptable if you have less than £1,000 in your account but you are literally losing money.

Every year the value of money, usually, increases. This is known as inflation and averages 1-3% per year in the UK. Meaning if you left £10,000 in an account earning nothing for a whole year your money is now worth £300 (3%) less.

If you aren’t receiving interest or benefits on your current account it might be worth reading our page on current accounts, where we talk through the best accounts on the market and just how easy it is to switch to a new provider nowadays.

The current account switch guarantee allows you to switch bank account providers within 7 days, moving direct debits and standing orders across hassle-free. The only thing you will need to update is the details held for any recurring payments. (e.g. - Spotify)

For full details on the current account switch, and how it works, see their site here.

You can have multiple accounts

If, for example you have a mortgage with your current provider and, you do not want to switch this bank account you are more than welcome to open a second, third, fourth etc. current account with a different provider.

There is no rule that states you can only have one main bank account. Of course, you will only get your wages paid into one but after that you can transfer it anywhere. Open another one to receive the benefits of the accounts whilst keeping the other open.

Keep in mind, every time you open a new current account your credit score will slightly drop for a few months.

Earn £100+ in 10 minutes

Expanding on the above, I thought I would offer an example. A few years ago Natwest were offering £150 to switch your current account to them. I already had one and read the T&Cs to see if I was eligible - I was.

So I went to Santander (my previous bank) and opened an account online in minutes as they had my details. I paid in £1 and waited for the information to process and 7 days later the card arrived in the post. I then followed the guidance on Natwest’s website on how to switch an account into an existing one. This took no more than 5 minutes.

The next week my Santander account was closed, card cut up, and I paid in the minimum deposit into the new account. A few months later I received £150 for no more than 10 minutes of work.

This does impact your credit score, but if you can meet the opening requirements you could easily do this a few times a year if you were desperate for cash.

See all of the current offers available here.

Instant Access is the best access

You may well find that instant access accounts pay higher interest than your current account. If this is the case, open one which you can access on an app/ online so you can get to your money at any time and transfer everything you know you won’t spend until later in the month to this account. Then transfer it back to the current account when you need it.

It may only be an extra few pennies or a few quid but it makes perfect sense when you can transfer at the tap of a button. However, you should note the TSB problems which occurred a few years ago where customers couldn’t access their money for several days and be wary of any direct debits which are set up.

Are Regular Savers a scam?

You will often see high-interest savings accounts being offered by the main high-street banks. These will often only be available for customers who hold a specific current account with them. The reason the banks do this is to draw in new customers with the high interest so they open a current account and a savings account - much more profitable for the banks.

You may wonder why the rates are so high until you see it’s a Regular Saver. Normally you will have to pay in, say, £25-£250 per month and the interest rate might be 3%. So you would pay in £3,000 over a year if you maxed the account out.

However, you wouldn’t receive £3,000 x 3% = £90. This is because £3,000 was only in the account for the final month, the balance has been building up earning 3% on the balances at the end of each month. Instead you would receive more like £49.20 which is more like 1.64% on £3,000.

If you could alternatively earn more than this from keeping it in a different account (e.g. - 1.75% then do so)

£1,000/yr bonuses??

Yes, that’s right £1,000 a year. The Government want to help those who are saving for their first home so have replaced the Help To Buy ISA with the new Lifetime ISA (LISA) account. This is basically a savings account which you can only access for two reasons:

• To buy your first home

• When you reach 60 for retirement

How it works: You can pay in up to £4,000 per tax year (6 April - 5 April) and the Government tops your account up with 25% of whatever you have contributed in the year.

Anyone who has never previously owned a home, and is aged 18-40 can open one of these accounts and make contributions until their 50th birthday. This means realistically you could earn a free £33k from this account.

You can probably get better returns for retirement from pension contributions, but for anyone who is saving for their first home this is a must. The important thing to do is open this account ASAP even if it is with £1. This is because you need to have had the account open for 1 year before using it.

Advantages:

• Free money

• Use the tax date advantages to earn £2k in a month (see below)

• Can be in stocks & shares

Disadvantages:

• Withdraw for any other reason (excl. terminal illness) and you pay a 25% penalty

• Needs to be open for a year before using

• Low interest rates ~ 1%

Tax date advantages

As the clock for ISA contributions resets on the 6 April. Say that you are buying a house at the end of May, and you have £8,000 in a separate savings account. Pay in £4k on the 5 April and £4k on the 6 April, by the end of May you should have received your 2 Government bonuses totalling £2,000.

Did we miss anything? If you still have questions on bank interest or ways to boost your savings interest we are more than happy to have a chat with you!

hello@thebankengine.com