Morning all! As you know, I manage several currencies as part of my net worth, and part of it is in the UK in Pounds Sterling. So this post is in GBP, just put a $ sign in front and you get the idea! This post is not sponsored, just my opinion about my bank.
I have been banking with three banks in the UK. HSBC who is uneventful but has my mortgage at a super low rate, First Direct that is part of HSBC group, has stellar customer service, gives you £100 to join and a free overdraft, but I closed the account since managing three banks was a hassle and Santander (Spanish group, ex Alliance and Leicester) is my main bank at the moment because they launched an awesome credit card called Santander Zero, that does not charge me any fee to withdraw money abroad and pay in foreign currencies. That was the card for my needs, in spite of having no cool rewards like airmiles or hotel nights, what I save in foreign exchange fees every year is more than making up for it.
So I moved my current account to Santander as well, and they offered a free current account with travel insurance that seemed pretty cool. They also had the best instant savings account in the market at 3%. Unfortunately, that deal finished after a year on April 15th. The savvy PF nerd that I am fought the procrastinator deeply rooted inside and when the calendar reminder popped up, I started checking the best instant savings rates on Money Saving Experts. Trying to get the best rate is a bit complicated since I am not in the UK at the moment so could only go for one with Santander or HSBC, who let me apply online for more banking products.
The rates offered for easy access savings were all around 1.8%-2.05%, except Santander, who offered 3% again… but on its Santander 123 premium current account. And cashback on top. The conditions are
£2 monthly fee
Cashback: 1% on your mortgage with Santander (not for me), Council Tax (I get £1.49)
2% on utilities (I get £0.62 for electric, water is included in HOA so won’t count)
3% on broadband and phone (I get £0.53 for my broadband bundle with O2, the best provider around, no I didn’t get paid to say that either, they really rock. Got bought by Sky recently though so I don’t know if that will last.)
Total: £2.64
The account is already paying me £0.64 to keep business as usual (or $1, can’t wait to update my net worth with that life changing amount haha!).
Savings rate: 1% on balances up to £1,000
2% on balances up to £2,000
3% on balances from £3,000 to £20,000.
At the moment I have just over £7,600 so can expect £19 monthly, which is what I was getting on the old savings account with no minimum balance, unfortunately the initial rate is over and it looks like that is the best thing around. I have to pay a £7,000 0% credit card by early June but plan on getting £3,000 on the account by then to keep the 3% rate.
The best thing about this account is that the interest rate runs daily on your current account balance. So it saves a lot of time not having to transfer from savings to fund current, and you get interest even on that little cushion you always leave on the current account to fund an unexpected bill.
Compared to my super cheap HSBC mortgage, Santander is not competitive but if you already have a mortgage with them, with $1,000 monthly payments you would get an extra $10 cashback.
The only perk I lost is the travel insurance, fingers crossed I don’t lose my luggage on my way to France (update: I traveled with a carry-on!), but the insurance was only for European travel anyway, which I have done none of since October 2012. It was great to have it while we were biking around Europe last summer, but now it is not a big loss.
While I was shopping for current accounts, I saw a few premium ones from other banks that offered airport lounge access and that seemed like a neat perk too, although I only plan on flying twice a year at most now, so wouldn’t make up the £20 or so monthly fee. Back in the UK when I was flying to mainland Europe 4 times a month I wish I had opted for one of those, forgetting my fear of flying in their open bars.
Do you bank premium or for free? What do you get for the price?
this post was featured on Freedom 35
I use credit unions. I can’t stand all the fees associated with banks and the fact is that my banking needs are very simple. I just need a place to deposit my paycheck, pay some bills,a and write checks.
When I was shopping for a new bank, I asked for recommendations and people kept directing me towards credit unions. The only problem, I couldn’t find a single one for which I qualified!
ouch. Do they require a certain work history, minimum monthly deposit or a minimum credit score?
I didn’t qualify for my current credit union. But I “donated” $25 to some charity which then qualified me to join the credit union. It seems silly, but that’s how the system works.
@Pauline Most credit unions in the US require membership with a certain organization, usually organizations that banded together to form the credit union in the first place.
@My FI Journey Thanks for the heads up. next time I’m in the market, I will look into that.
This bank had a free basic banking account but you wouldn’t get the 3% savings account, which makes the fee worth it from a certain balance. Pretty sure many subscribe and could do fine with the free account though.
I pay nothing for my checking account, and I get what I pay for! Haha just kidding, but in all honesty I realize there are some paid options that make sense, but it seems like most of the banks in the US are really competing in the “free” category, and especially once you have $5k or $10k in the bank they will fight for your business.
I took it more for the 3% on savings than anything, and haven’t heard about such high savings rates in the US in a long time. It sounds nice that the banks fight for your business, what I find harsh is the minimum balance obligation on a non interest paying account, maintaining $2K cash for example or being charged a fee makes the bank a lot of money by lending that extra $$
It’s always worth it to get the best deals. One that I find myself surprised by is people who actively invest their money but don’t shop around for the best deals. They find themselves paying an extremely high rate per trade and because their balance isn’t that high, it really cuts into their overall ROR. Putting in a little extra time and energy to find the best deal is usually worth it.
Of course. That 20 minutes of internet banking saved me a bit with cashback and allows me to get 3% on savings. If you research a bit more for your investments you can certainly get a low cost trading company.
My accounts are “free” although US Bank has a funny way of doing that. Their maintenence fee if $5.95/month, but because I meet their requirements for a free account (I transfer $25/month into a linked savings account), they then refund the fee five minutes later. Even though the specific purpose of that account is to pay debt and I try to keep the average daily balance low, I do maintain a bit of a buffer out of habit. If I didn’t, I could over draft my account on a fee that gets refunded after 5 minutes!
yes, gotta be careful with this one. I never get why one has to pay to keep his money on a bank account, and help the bank make more money.
One bank where we have a joint account with my wife offers a rewards points. The reward points we can use to buy groceries or for shopping. Last year my wife bought two pairs of shoes from the rewards alone.
I am also shopping for a bank that will offer air miles or better perks.
I would love airmiles, haven’t found one so far that would meet my other needs though.
I’ve always used the credit union too, for their low cost banking and low loan rates, but I love your thoughts here as they teach that sometimes it’s worth it to pay a fee for a checking account. Great post, Pauline.
Well I’d rather not pay, because I have to stay alert, if my situation changes it may not be worth it anymore, while with a free account you just leave it there. But a 3% savings rate is really good at the moment.
All my accounts are free. I have two credit unions and one big bank. The big bank would charge me fees, but I more than meet the minimums to avoid those fees. There are some complicated reasons why I stick with the big bank, but the major perk is my personal banker and the safety deposit box. I can’t imagine I would find an account here with a fee that would be worth it to me, but there are a couple credit cards that have fees that I am more than happy to pay, so I guess that evens out.
what do you get in exchange for the credit card fee? In France most credit cards are actually debit cards and come with a $50/year fee for NOTHING. No airmiles, no travel insurance, and not even 50 days free interest, since the money is taken out of your account on the day following the purchase.
One of the cards I have gives me mid-level status at Hilton Hotels (free breakfast and internet) so a couple of stays there makes the fee worth it and I get a free night once a year, and I use it on a room that cost more than the annual fee. I have an airline credit card that gives me my first checked bag free for me and anyone traveling on my ticket so that saves me $50+ a roundtrip and pays for itself pretty quick.
I haven’t jumped on the Amex Platinum yet ($495/yr), but if there is a 50000 point offer I would, since it gives you airport lounge access, a $200/calendar year airline credit and will reimburse the $100 for global entry. So that one would more than pay for itself the first year and then I would have to do a cost/benefit to see if it was worth it again.
The market for credit card rewards and churning credit cards in the US is amazing and really makes traveling much more affordable to people with good credit.
All free accounts for me. I haven’t spent a ton of time looking for the “best” deal, but I also haven’t found a need for anything more than I’m currently getting. My free bank accounts let me do all my bill-paying and get me a reasonable interest rate (by today’s standards). My free credit cards get me between 1.5-2% cash back on everything. I do think it’s smart to understand value and not just assume that free is always best, as you’ve done here. Sometimes it pays off to pay a little more.
Wow, banks usually don’t offer bonuses on bank accounts, just credit cards! Sounds like you got an awesome deal. As long as the pros outweigh the cons (or in your case, the benefits outweigh the cost), you are golden!
Credit cards are pretty bad in the UK/Europe in general, nothing compared to the awesome perks offered in NA, so they make it up with bank accounts I guess.
Our two banks are free. Well, our main one – U.S. Bank is free with a catch. You have to keep a certain minimum daily balance that they have some ridiculously long formula to figure out. If you don’t keep that balance it’s a $5.95 monthly maintenance fee. Our other bank, USAA is where we have all of our targeted savings accounts. They’re awesome & free and if they had local branches we would switch everything to them.
I heard good things about USAA, and also Charles Schwab since they don’t charge ATM fees, in the US or abroad.
I recently found out that my wife had been using a bank for 7 years that charged her a monthly fee. She didn’t even know about it! I guess that means we had a paid bank account. Sigh…
she didn’t know about it??? money disappearing monthly for 7 years you can be sure I would have noticed haha!
I use mostly free banking services but if I found the right reasons to go premium I probably would. If were to travel more like you do it would definitely be worth it.
some have insurance too, like car rental insurance or a deal on home insurance that can justify the premium cost.
I have a mortgage with Bank of America, so I’m exempt from the fees they would normally charge for my type of account. However, I would still pay a small fee for the extra services I receive.
Being in the brokerage/banking industry, I understand that banks must charge a small amount to make money off of low balance accounts.
that is what I have a hard time getting. Because people have mortgages, savings accounts, etc. the money is spread and the bank makes money on it. Having on top of that a fee for checking is not something I am used to, especially since I asked to go 100% paperless. A basic bank account for free should get customers through the door, and like credit cards, you then make more money off certain customers than others.
I have a credit union (no fees) and a regular bank with a free checking account. I get what I need.
1% cash back on my mortgage would be awesome! Especially if it included my extra principal.
Ha ha – PF nerd vs procrastinator – how ell I know that conflict!
I bank for free – in fact with an HBOS Reward account that gives me £5 a month when I pay in £1000 a month. I was seduced by this cos it was more than I was already paying in interest, but it has no other benefits, so it isn’t really particularly great. And their customer service is, frankly, poor. Mr Skint on the other hand is with First Direct and, like you, can’t praise their customer service highly enough.
Maybe this is the year for the PF nerd in me to triumph and I’ll finally make the switch!
where money is concerned, procrastinator usually loses 🙂 £5/ month sounds good, sadly I can’t get a new bank unless they have a full online application, and having my tenants change their standing order is a bit complicated. First Direct had a long lasting £100 offer to go bank with them and £100 if you leave within X months because you didn’t like them, I imagine that still stands, £100 is already more than 12 months of BOS, and they have £100 free overdraft for the days you forget to fund your account for a few days, which is nice too.
Pauline, procrastinator has been winning far too often lately. So much so that I actually, just today, scheduled a date in the diary for later this month to go through all the outstanding finance stuff – I know I’m letting things slip and must take them back in hand!!
I didn’t know about that First Direct incentive, so thanks for that. Sometimes the hassle of switching stops me from doing so, but, a bit like going to the gym, it’s usually not as bad as I thought it was going to be once I get started!
they have a hassle free service, you give them your old account number and they switch Direct debits and SO over for you.
http://www1.firstdirect.com/1/2/1st-account
they still have the 100 incentive, and 100 if you leave within 12 months.
Wow, thanks Pauline, I’ll definitely check them out. Another task for my finance overhaul day!
I have a free checking account that pays interest with my brokerage firm. They also refund any ATM fees, so the combination is pretty hard to beat from what I’ve found out there lately. I wouldn’t be totally opposed to paying a small fee for a bank account, but the perks associated with it would have to greatly outweigh what you get with a free acct.
I don’t like that I have to constantly check that the perks outweigh the cost but so far they do.
My bank is free as long as you have a paycheck direct deposited and get electronic statements. I can see why you went with the fee service. 3% is a great rate these days. I believe my bank’s savings account rate is .2% right now. I could almost keep it under the mattress for that amount.
.20% is quite depressing indeed. I get itchy to invest when I have too much cash, with that rate I’d probably keep no cash at all!
I am with My Financial Independence Journey. I have been with the same credit union since 1998 and they are stellar. No frills, no nonsense, just excellent service and no hassle and since we are off during the day, no lines when we have to deposit checks once or twice a month.
However, Pauline, I wish they had a savings acct with 3%. Dang it!!!
The UK seems to be offering quite good rates, when I moved there in 2007 I have a 6% savings account. They also have an 8% regular saver if you deposit $300/month but you can’t deposit more so over the 12 months it works out to an average 4%, still not too bad.
Holy crap!!!!!!!!! We deposit a lot more than that a month. What a pity….
I use a free account that is technically a paid account whose fee is waived due to my monthly account balance. I’ve been with the same bank since I was 10 or 12 – they always give me great service. 🙂
I am not a fan of those as you always have to check your balance but the good customer service is a rare thing those days so worth keeping.
We have a bank acocunt for fee; however, it more than pays for itself since one of the benefits is access to launges at airport and at times I live in them.
I haven’t found airport lounges accounts at less than 15 pounds a month, wish I’d known about them when I was flying 2/3 times a week!