In the end I decided not to go with it, because the application form required too much information from me - more than normally required under Money Laundering.

Can I just say that in most cases, the higher the interest rate the higher the risk.!

Oh I forgot. Maybe this is more helpful. You need to credit in 500£ "minimum". This means you can open your balance with X£ (1

Okay, I see where you are coming from, Knowlittle. However, this £500 going back and forth is going to be earning very little interest ?

I-LUV-MONEY please read more carefully. It wasn't my intention to advertise the A&L account for free - at this point they must give me some sort of bonus!

You got it all wrong. You need to transfer in 500£ per month, that's all. This means you put 2.5K (or whatever you have available up to 2.5K) straight in from day 1 earning 8.5% interest on the max amount allowed. Every month you credit in 500£ to meet the 8.5% requirement. You don't need to leave the 500£ in the account, just take it out as soon as it appears on your balance. You will have 2.5K always sitting in the account and 500£ moving in/out every month. I didn't remember the 8.5% was fixed! You can do the same with Abbey (8%) and you will have basically 5K at 8.25% interest for one year. This is how it works. It does require some brain activity (500£ in/out once a month) but this is the small price to pay to have such interest. I hope this has cleared you doubts.

knowlittle:A&L Premier Direct Current account (easy access, 8,5% on the first 2.5K on balance).

I have now had a chance to look at the account. The "problem" is where to start, If you start at say £1, you have to pay £500 in each month and after 5 months you have reached the max of £2500, anything over earns a pathetic 0.10%. So for month 1 you would earn 8% on £1, month 2 8% on £501, month 3 8% on £1001 etc. Although the interest is lower on ICCI bank, you can put a lump sum in.

I think you are doing the right thing for your circumstances. I do much the same with a certain amount of my monthly income. There comes a point,where juggling different accounts becomes onerous and can cause problems and costs if you forget to do something. Provided you can keep on top of it,its got to be a sensible approach.

I was just pointing out that the products you have talked about are not directly comparable. Very much apples and pears. For me, I have savings for which it is better to find longer term bonds and the rates are quite attractive at the moment.With the clamour to kick start the housing market,interest rates may well start to fall once inflation calms and fixing some investments at higher fixed rates looks like a decent option to me. These bond rates are still quite high because of the need for liquidity amongst the financial institutions.

Good luck with your savings.

backfoot, I respect your analysis. I only would like to stress these two aspects :

1) look at it from the point of view of a small saver, "Mr T". Let me draw this comparison. Let's say most of the money Mr T saves goes into an ISA. Let's say the best ISA available was the Barclays 6.5% fixed. Mr T invests the full allowance, which will give him ca £230 interest after 12 months. Apart from his ISA, Mr T has 5K to put away. Do you think Mr T would rate £50 as a minor benefit in comparison to the 230£ interest is getting from his ISA? I think Mr T will definitely apply for A&L 8.5% and take on "the hassle" of making sure every month 500£ go in and out. My argument is valid for all the Mr Ts in UK who'd rather be 50£ better off at the end of the Year. Why should they leave it to the banks?

2) Forget about ISAs, let's assume that is always the first option. As I said, I'm not an expert and it should be clear by now I am not a native either. However I do know that the interest a saving product gives you is proportional to its restrictions. By loosing the benefit of flexibility and easy access, bonds should in theory have higher interests. Undoubtedly A&L current account is a better product than the ICICI bond, which is odd. Is this because people at A&L are crazy or maybe ICICI playing down? To be honest, I can't care less. I can't see a single reason to put my money into ICICI . You are right, most banks attracts you with bonuses that won't last. When this happens - when current accounts will offer less than 7.2% - I will join ICICI. Until then I am happy to keep the extra cash, even if it is 5£!

The reason why I opened this thread is to understand whether it is possible that there will be better bonds in the future given the need of cash from the Banks. It seems that many consider ICICI an unbeatable product while I think it can be beaten by simple current accounts.

Thanks

knowlittle:Hi Mooreaz, Oh yeah, it is definitely worth! I did it a couple of months ago. I had a current account with RBS and one day I decided to wake up and stop flushing my money down the loo. I first opened an account with A&L (8.5%). They only require you to transfer in 500 a month. They don't require you to switch and I din't sign up for their switching service. I only have 2.5K sitting there (8.5% is only for the first 2.5 K in your account), which works out 14£/month = 168£/year. After 1 week, I opened an account with abbey (8%). Again, 2.5K sitting there, ca 13£/month = 156/year. They do say you need to switch and I only had my salary credited in by my employer. Nothing more. To note that: - I kept all my direct debit payments with RBS, - I transfer the money around by standing order (Abbey>A&L>RBS) - I didn't ask for credit cards, overdrafts or other catches. Where is the hassle? In comparison to last year, my money is still flexible and I am earning 300+ pounds for doing nothing. Again, why should one tie up their money in a bond with a 7.2% interest? Nobody has convinced me yet! Thanks

Anything you can do to increase your income by careful financial planning has to be applauded.Well done.

Just looking at your analysis,though I think you are overeggiing the benefits. The claim is £300 for doing nothing and then comparing it to ICICI bond rate.The relevant benefit is £5,000 multiplied by the differential between the rates. i.e. 8.5% minus 7.2% = 1.3%. That gives an after tax benefit of just over £50. p. a.

It is still beneficial and provided you have the time and inclination,other marginal gains can be made via Regular Saver Accounts, Cash ISA's and so on.I think many of us already do this to some extent or other.

The comparison between a one year bond and what you are doing is not very meaningful. Most investors/savers will use a one year bond to tuck away cash for a term after they have dealt with their easy access cash. The rates on bonds have held up well and are historically quite good.I personally class 7.2% on such a product as good,especially given the stock market uncertainties.

I am not a fan of these low level gimmicks to draw custom in. A&L are notorious for using them to attract custom only to drop rates back later.There are often onerous conditions connected with these headline rates and then you get bombarded by cross selling thereafter. (HBOS).

My pleasure.

A&L Premier Direct Current account (easy access, 8,5% on the first 2.5K on balance). No need to go to the branch, you can do everything online. It does not require you to switch. If you have a friend with the same account you can share with him 50£ reward from A&L.(I got it) If you switch they will give you 100£ but you won't be able to open the Abbey account!

Abbey current account (easy acces, 8% on the first 2.5K on balance). I suggest you read carefully the T&Cs. You need to switch your current account. I opened it at the local branch and I suggest you do the same. I did have my salary paid in the abbey account but I told the manager that I only had 1 direct debit with my old bank and I was going to close it anyway. As a result, the manager wrote a note to the Abbey Switch team saying that there were no direct debits to be transferred. You also have to opt for the credit in option. I refused any overdraft and did not take credit cards.

As a matter of fact I use these accounts as a bond. Only remember to move money in and out to meet the high interest conditions (500 A&L, 1K Abbey per month). I use the cards sometimes at Tesco or to pay my bills at the post office just to make sure nobody from the Banks will say I am not using them as current accounts.

It has worked out pretty well for me.

knowlittle:They might have changed the T&Cs, I don't know what you are talking about. It would help if you could clarify please. I pay no fees and I'm pretty sure about it. Yes, A&L works out much better than ICICI for me.

I am sorry, I cannot find the link now !

So, please tell me the name of the accounts at A&L and Abbey that offer easy access at high rates.

Thanks.

"Out of interest, I have just looked at the A&L one, and you have to pay a £10 fee each month for another account. So does this still make it a better option that ICICI ? (Forgot my calculator!)."

They might have changed the T&Cs, I don't know what you are talking about. It would help if you could clarify please.
I pay no fees and I'm pretty sure about it. Yes, A&L works out much better than ICICI for me.

Out of interest, I have just looked at the A&L one, and you have to pay a £10 fee each month for another account. So does this still make it a better option that ICICI ? (Forgot my calculator!).

Thanks mooreaz.

I would like to say that I am not an expert at all. It doesn't take too much effort to understand that 8.5 is higher than 7.2 and the information is out there for any one to see. Thanks to online banking and automatic payments, my money flows from one account to the other. I don't need to do anything apart from collecting the interest earned at the end of the month. You are right, most people do not shop around. It really takes no effort to make some extra cash but some can't be bothered. We all blame governments and banks for our misfortune though!

A bond with ICICI does not make any sense for me.
Given the alternatives, they better come up with something better if they want to have my 5K.

If you are prepared to do the work and keep on top of your finances to this extent that there is no need at all to tie up your finances into a 12 month bond.

There is nothing to convince. You are using the system to your advantage by careful planning and execution. This is my only disagreement with your post above. You say you are earning £300+ for doing nothing. On the contrary, you are earning £300+ for your effort upfront researching, understanding and planning of the market.

All I would add is that you are in the minority group of people who are either prepared to or capable of doing this.