M&S offers current account customers 6% savings rate
They can save between £25 and £250 a month and can earn up to £78.31 net of basic-rate tax after 12 months, if they invest the maximum.
No withdrawals are permitted from the savings account during the year but deposits don't have to made every month and any unused portion of the monthly limit of £250 can be carried over into subsequent months.
If the customer already has an M&S Bank Everyday Savings Account, which pays a preferential rate of 0.75% AER, the annual Monthly Saver balance will be transferred into it. If they don't, the annual balance and interest from the Monthly Saver will be credited to their M&S bank account.
At this point, personal finance expert Andrew Hagger, says customers will have a choice to make in terms of what they do with their savings, "perhaps selecting a competitive savings bond or Isa as a home for their lump sum or alternatively feeding it back into the M&S current account to take advantage of 6% via monthly savings in year two," he suggests.
M&S Bank isn't the only current account provider to offer savers appealing rates through linked accounts. First Direct gives its 1st Account customers access to a 6% rate too, through its Regular Saver account.
However, while there's no minimum monthly amount that has to be paid into the M&S current account to get access to the 6% savings rate, First Direct customers have to commit to pay in £100 a month to their current account, or they face a £10 monthly charge.
Hagger also points out that the £78.31 net interest earned on paying the maximum £250 a month into the M&S Monthly Savings Account is bettered by two other providers when compared to the interest paid on a £3,000 current account balance.
Nationwide's FlexDirect current account also offers a linked savings account, but it includes a first-year bonus rate of 5% AER that slumps to 1% AER from the second year on.
The TSB Classic Plus current account alone would yield an annual return of £80 for customers who are always in the black, paying 5% in-credit interest on the first £2,000. However, Hagger says that this seemingly attractive rate can be overshadowed by the high cost of authorised borrowing and debit card use abroad.
Hagger said: "Current accounts are increasingly becoming the best way to access high-rate savings accounts and if you've got a balance in excess of £3,000 and know you'll always remain in the black then Santander 123 and Lloyds Bank (Club Lloyds) will remain a popular choice.
"However, if your balance dips into the red from time to time, the high overdraft charges will take the shine off these in credit earnings."
He added: "Lump sum current account credit balances offer the flexibility of being able to access your cash instantly. However, there are a couple of advantages of a separate monthly saver – namely that your savings don't get muddled up with your everyday spending plus you can clearly track your savings balance and see it grow month on month."
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.