With TSB having just launched their Classic Plus account you can now fully implement the strategy detailed below to start earning 6.5% on your cash savings.
Earn 6.5% on your cash this year (up to £6,500 investment)
With the current miserly interest rates on savings accounts and cash ISAs here is a clever way to earn 6.5% interest on your cash (net of basic rate tax). Credit goes to Dan Hyde of The Telegraph for doing the leg work and coming up with the idea.
The process looks a bit complicated at first but bear with me and you can earn a very good interest rate on your savings.
- First, set up a secondary current account with your bank
- Make sure it has two direct debits going out each month
- Switch this new account to a Halifax Reward Current Account. For this you will receive £100 tax-free as a welcome gift. Put this £100 aside as the first payment towards your interest total for the year
- This account also pays £5 a month interest (after basic rate tax) as a 'reward' for being a customer so long as you pay in at least £750 monthly and have two direct debits scheduled
- Now set up three further accounts, two with TSB Classic Plus and a FlexDirect account with Nationwide
- The TSB accounts pay 4% interest (after basic rate tax) on up to £2,000, each customer is limited to holding just two of these accounts with means a total of £4,000 invested
- The Nationwide account pays the same interest rate, 4% (after basic rate tax) on up to £2,500 for a year but only one account can be opened per customer
- Take your £6,500 cash and put £2,000 in each of the TSB accounts and the balance (£2,500) into the Nationwide FlexDirect account
- Set up a series of standing orders to flow between the four accounts
- Payment One - scheduled for the 1st of every month paying £1,000 from your Nationwide FlexDirect to your Halifax Reward Current Account which will meet the £750 a month funding requirement for Halifax pay the £5 monthly reward
- Payment Two - scheduled for the 2nd of every month, allowing time for the first payment to process, this payment moves the same £1,000 from Halifax to your first TSB account leaving the Halifax account empty, this meets the £500 monthly funding to earn 5% interest with TSB
- You will need to arrange a separate payment, or standing order, to the Halifax account from your main current account to cover the two direct debits
- Payment Three - scheduled for the 2nd of every month to take the same £1,000 on to your second TSB account, this ticks the £500 funding box on this account guaranteeing 5% interest
- Payment Four - scheduled for the 3rd of every month to take the same £1,000 from your second TSB account back to the Nationwide
All you have done is send £1,000 in a full circle through four accounts, guaranteeing the interest rate offered on each account on the way, before it lands back where it started in your Nationwide account
- You have now invested £6,500
- You have earned £160 interest from the Halifax
- You have earned £260 from the three 5% current accounts
- £420 interest on an investment of £6,500 equates to 6.5%