I intend switching banks. Santander offers 1.5% interest on balances up to £20,000 but charges a £5 monthly fee. HSBC pays £150 for switching and also has a 1 year Regular Saver account paying 5% interest on £250 paid in monthly. If I have £16,000 in my account, would Santander or HSBC gain the most money over 1 year?

  • 2
    Do you mean that HSBC pays 5% on your balance so long as you deposit 250/month?
    – Hart CO
    Feb 12 '19 at 17:54
  • The monthly fee drops Santander's effective interest to 1.125%, netting you about $180 over the year. What you can expect from HSBC is unclear from your description, but if it's more than $30, it would be worth it.
    – Kevin
    Feb 12 '19 at 19:19
  • @HartCO £250 a month would be the maximum. It's standard practice on this type of account to offer a teaser rate but to cap the payments and limit the term to a year.
    – richardb
    Feb 12 '19 at 22:54

The 1 year Regular Saver account is not equivalent to 5% saving account. You can only deposit 250/month and you are forced to withdraw all of them at the end of 1 year period. If you look into their sample calculation, if you deposit 250 every month, at the end you get 3081.25 (less than 3000*1.05). In the next year (if they still have the same offer), you will have to restart the deposit.

Mathematically you can think of that as a combination of a 12 month CD, 11 month CD, ... 2 month CD, 1 month CD over a year (start at the time you open the account). Each of them is limited to 250 dollar deposit and pays 5% APY. It should be treated as a promotion bonus but not a regular saving strategy.

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