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Saturday, June 04, 2011

UK Bank Accounts

Disclaimer: Below is my understanding/ experience of various types of bank accounts available, and is not meant to "advise" you on any kind of investment.

Retail banking in the UK is a lot different from what I was used to in Pakistan. While I covered HSBC Passport account in one of my existing posts, HSBC Passport is a current account nevertheless and the charges are £8 per month. Now, if you are from Pakistan, you might have never heard of "paying" the bank to maintain your account. But it's the norm here in the UK. The more you are willing to pay, the better "type of account" you can get from the bank.

So, I started my hunt for a "savings" account and found that there are too many options!

As part of your HSBC Passport account, HSBC also opens up a Regular Saver account for you as well. Now, this is one of the best saving accounts out there (8% AER/ gross) but unfortunately, if you withdraw any amount from this account, it converts to a Flex Saver account (0.05% or 0.10% AER/ gross). Can you believe that somebody is paying a 0.05% interest which comes to 0.04% after the tax?!! What does it come to per month? 0.003%? So, you put in 1000 pounds and get mere 0.03 a month as interest.

But all is not bleak, there is something known as Cash ISA, and like other banks, HSBC has one to offer as well. If you are interested in saving money in the UK, it's unfortunate if you don't have a Cash ISA account. It's tax free savings but there is an upper limit on how much money you can put into that account; you can save upto £5,340 this tax year. HSBC offers a maximum interest rate of 2.75% on Cash ISA's. Here is a complete list of interest rates on various types of HSBC saving accounts.

Even better it to check Money Supermarket Savings accounts for an excellent comparison.

Someone, perhaps Martin Lewis himself, left a link to Money Saving Expert which is kind a similar to Money Supermarket but a little more "engaging." The site has an excellent post describing Inflation Linked Savings in plain English.