A few years ago I was the proud manager of multiple bank accounts. Pretty surprising, considering I’m hardly the most industrious rodent in the rat race of work.
In this post I’ll talk about how I ended up with so many bank accounts and what I learned.
I’ll also share a few tips to help you secure a better interest rate today.
But first things first – how did managing my savings turn into almost a part-time job?
Work hard-ish, save harder
I’ve never been a very high-earner. And while I’d welcome any chance to change that, my full-time job is foremost a means to an end.
I know not everyone feels this way about work. Perhaps that’s why I’m not promoted ahead of my more ambitious colleagues. (Or maybe I just lack their skills, personality, and brainpower? Don’t answer that!)
Regardless, chasing money in a high-stress job at the expense of living life is not for me. I prefer a lower-paid job I can tolerate to a high-paying role I can’t stand.
Despite my low earnings, like most Monevator readers I dream of retiring early. So I’ve always understood the importance of saving regularly and getting the highest interest I can on my cash.
However my income doesn’t leave me much latitude to be frivolous.
My saving account years
My younger self thought the stock market was a casino. As a risk-averse person, I preferred to stash my cash into a savings account. I wanted a guaranteed return.
In my defence, savings rates a decade or so ago weren’t anything like as low as in recent times.
I got a cool 3% interest in an easy-access Cash ISA. That’s not going to make Warren Buffett sweat, but it was comfortably above inflation at the time.
Throughout the 2010s though, savings rates on standard savings accounts and cash ISAs alike deteriorated. By the end of the decade even 1% easy-access rates were extinct.
Financial forces – ranging from the Government’s Funding for Lending scheme (launched in 2012) to the Bank of England’s low base rate – pressed down on interest rates on cash.
Banks could easily access cheap money, so they had less need to attract savings from the average Joe. Savings interest rates were hammered.
Using multiple bank accounts to up my interest rate
As savings rates on normal accounts began to get embarrassing, I started stashing my cash in multiple bank accounts. This way I could continue to earn a decent overall return.
Oddly enough, while interest rates on savings accounts were low, many current accounts offered higher headline rates to attract new customers.
While even the highest-paying easy-access savings accounts at times paid less than 1%, the best current accounts were offering as much as 5% in interest.
These rates surely weren’t profitable for banks. Presumably some had decided that sending money out the door this way was a price worth paying to expand their total customer base.
The snag?
Opening and profiting from these current accounts was rarely as straightforward as with traditional savings accounts.
Multiple bank accounts, multiple hurdles
Very often the juicy headline rates only applied on relatively small sums, for example.
Some accounts also stipulated you had to pay in a set amount each month to receive the interest.
But these barriers did not deter me!
Over a year or so, I opened numerous current accounts, one after another. I stashed the maximum allowed into each one.
At the same time I was also opening bank accounts to profit from switching bonuses.
To get around any minimum pay-in stipulations, I set up standing orders to move my money between accounts.
For example, if one account required you to pay in a minimum of £500 per month, I’d set up an automatic payment to cycle this between two accounts.
It sounds a faff, but it didn’t take more than half an hour to sort out.
I had multiple bank accounts including:
- £2,500 in Nationwide’s FlexDirect account (5% interest)
- £2,000 in a TSB Classic Plus account (5% interest)
- £5,000 in a Club Lloyds account (4%)
- £20,000 in a Santander 123 account (3%)
- £5,000 in three Bank of Scotland current accounts (3%)
- £3,000 in two Tesco current accounts (3%)
As a result I earned a savings rate far above those offered on normal savings accounts – yet still without risking my savings on anything racier than cash.
Incidentally, I actually had three Bank of Scotland accounts and two Tesco accounts as these providers allowed you to hold multiple accounts.
My investing years
Sadly, these generous current accounts have since disappeared or else they’ve massively reduced their interest rates. The benefit of saving in multiple bank accounts isn’t really a thing anymore.
Once I realised earning a decent return on my cash through interest was no longer possible, I began to think about investing my wealth instead.
Thanks to Monevator, the majority of my money is now in an investing account.
To date, my index tracker funds have earned a far greater sum than I would have made had I saved in a normal savings account.
Of course, investing is a different beast from saving. And there are no guarantees investing will trump returns from savings accounts in future.
Nevertheless, I’m happy I now have a long-term plan for building my wealth, rather than having to juggle ten or more bank accounts!
Three ways to boost the interest rate on your savings today
Despite today’s high inflation, I still like to keep a bit in cash on hand for a rainy day. And I continue to hunt for the best options.
If like me you’re partial to holding some cash, you may be able to boost the interest rate you earn.
Right now, you can earn 1.5% AER variable via app-only Chase Bank. While it’s a savings account, you must first open Chase’s current account to access it.
If you’d rather not open a new bank account, then Cynergy Bank pays 1.2% AER variable, including a 0.9% fixed bonus for 12 months.
If neither of those easy-access options take your fancy, here’s some alternative tips to help you boost the interest rate on your cash:
Tip #1: Lock away your cash
Easy-access interest rates can be dire, but if you’re happy to lock away your cash for at least a year you can easily bag higher savings rates. That being said, if you do opt for a fixed savings account, consider the effects of inflation.
For example, if your money is locked away for a long time and inflation and bank rates spiral, you won’t be able to do much about it.
Going for a one-year fix is a decent compromise. As your fixes roll over, simply re-up them to the best new fixes available.
Tip #2: Consider Sharia savings accounts
Sharia savings accounts can be opened by anyone. They work like normal savings accounts. The only difference is they follow Islamic banking principles.
This means that technically they don’t pay interest. Instead, they pay you an ‘expected profit rate.’
Often these expected rates are very competitive. It can pay to widen your search to include these types of accounts.
Tip #3: Look into regular savings accounts
If you squirrel away cash each month, then regular savings accounts can still offer you a way to earn a higher interest rate. Rates of 2-3% aren’t uncommon, though many of the best deals are tied to a bank’s specific current account.
There are also often limits as to how much you can save each month in these accounts. But some let you stash away up to £500 a month. Not too shabby.
You could well end up with multiple bank accounts spread around to harvest these higher regular savings rates. A blast from the past for me!
Are there any savings tips that I’ve missed? Have you used multiple bank accounts to boost your saving rate? Comment below – and see all my previous articles in my dedicated archive.
