Friday, 12 May 2017

How to Earn 4.2% Interest on £15000 savings using Bank Accounts

Can you Earn Over 4% Interest on £15000 risk free?

After repeatedly trying to help readers of This is Money to get decent rates on their savings and repeatedly being told I'm lying that I can earn decent interest on £15000, I decided to spell out exactly how it can be done. You do need to open accounts but to get 10x the rate available on a cash ISA seems worthwhile to me. You can even use variations to suit the amount of money you have and even drop the number of accounts or regular savers if you want less hassle.

There are a number of current accounts paying interest, some vastly higher than any savings account. As of today, Tesco Bank pay 3% on £6000, TSB pay 3% on £3000 and Nationwide pay 3% or 5% depending on the account but £2500 in each account. For a couple you can do even better and get £7500 at 5% with Nationwide for 1 year.

Regular saver accounts

There are some savings accounts where you commit to paying a regular amount each month and the bank will pay a high rate of interest on the money. Some people think incorrectly that the interest rate is reduced but this is untrue. You get exactly the interest rate stated but only on the money in the account. Why would a bank pay interest on money you haven't deposited with them?

There are regular saver accounts with HSBC, M&S Bank and Nationwide that all pay 5%. If these are combined with the current accounts above then you can earn 4.2% on £15000 by moving money from 3% to 5% over the year. If you maximise the current accounts too then you can get more than £15,000 in the accounts by the end of the year - the total you could have at the end of the year would be £27,000 all earning good interest of 3% or above.

If you feed money into the 5% regular saver accounts from a current account paying 3% then the average that you get over the year will be just over 4%. Obviously all this depends on you having the money in the first place but if you have the £2000 or less that 70% of the UK population have in savings then you can get 5% on this whole amount with Nationwide Building Society.

The accounts and interest are shown in the table below:

Month
1 2 3 4 5 6 7 8 9 10 11 12
Interest Rate
Nationwide 5 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500
TSB 3 1500 1250 1000 750 500 250 0
TSB 3 1500 1500 1500 1500 1500 1500 1500 1250 1000 750 500 250
Tesco 3 3000 2750 2500 2250 2000 1750 1500 1250 1000 750 500 250
Tesco 3 3000 2500 2000 1500 1000 500 0
Nationwide 3 2500 2500 2500 2500 2500 2500 2500 2000 1500 1000 500 0
HSBC 5 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 £81.58
Nationwide 5 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 £163.00
M&S 5 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 £81.58
15000 15000
Nationwide £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £10.42 £125.00
TSB £3.75 £3.13 £2.50 £1.88 £1.25 £0.63 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £13.13
TSB £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £3.13 £2.50 £1.88 £1.25 £0.63 £35.63
Tesco £7.50 £6.88 £6.25 £5.63 £5.00 £4.38 £3.75 £3.13 £2.50 £1.88 £1.25 £0.63 £48.75
Tesco £7.50 £6.25 £5.00 £3.75 £2.50 £1.25 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £26.25
Nationwide £6.25 £6.25 £6.25 £6.25 £6.25 £6.25 £6.25 £5.00 £3.75 £2.50 £1.25 £0.00 £56.25
Average Interest 4.2% Total Interest Paid £631.16

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