Best on demand deposit for 40k ?

[Hasslehoff]

I have 40k at present to throw into a deposit/demand savings account , anyone know the current best deals out there ? will only leave it there for about 10 weeks though

 

[ClubMan]

See the Financial Best Buys forum lists of the best deposit rates on offer.

For c. 10 weeks probably something like < €15K in First Active eSavings at 5.22% gross CAR, €10K in Halifax FlexiSaver at 5.15% and the rest in Northern Rock Demand Online at 5%.

 

[Hasslehoff]

cheers Clubman

 

[fred1112]

Hi,

I was wondering why splitting the 40k would be better than depositing the lot in one bank offering the best interest rate for the 10 weeks. Is it because it is more tax efficient or for security reasons? I'm in a similar position myself
Thanks,
Fred

 

[MysticX]

I was wondering why splitting the 40k would be better than depositing the lot in one bank offering the best interest rate for the 10 weeks. Is it because it is more tax efficient or for security reasons?

There's a few different reasons but the top two reasons I can think of are:
(1) Banded Rates
You get a higher interest return if you don't exceed a certain amount(depending on the product). Clubman broke it down so the overall return is maximised in demand deposit terms. For example you only get 5.22% on FA eSavings if < 15K otherwise it drops down to 4.33%. You could alternatively put the next 10K after Halifax into the AIB Online Notice Deposit 7 (5%), then the remainder into Northern Rock for more diversity; though the interest will remain the same.
(2) Security
The Irish deposit protection scheme only covers you for 90% of the first 20K in each bank, thus by spreading amounts > 20K you maximise your protection... and your not completely stuck for cash should one of the banks go burst.... An interesting point on that note is that Northern Rock (based in UK so covered by the UK deposit protection) deposits are temporaily 100% guaranteed by the Bank of England so you wouldn't loose a cent... though even when that protection expires and reverts to the normal protection of 100% of the first 35k Sterling (correct me if I'm wrong but I think that's correct after the reforms) which is currently ~44.6 K Euros and that's plenty....

 

[ClubMan]

My rationale for the split in my previous post was due to "banded rates".

 

[Gautama]

Hi,

I was wondering why splitting the 40k would be better than depositing the lot in one bank offering the best interest rate for the 10 weeks. Is it because it is more tax efficient or for security reasons? I'm in a similar position myself
Thanks,
Fred

Personally speaking I would do so for security reasons.
If a bank goes bust you will be protected by the Irish Financial Regulator to the tune of €20k. Therefore, if you are based in Ireland, with €40k it would be prudent to have the money in three accounts, from different banks.
This is a lesson I learned from the Northern Rock debacle. Though I did not lose any money, I learned that NR are badly managed and it is better to have the money spread around. Don't put all you eggs in the one basket, and all that (especially if one of them are run by basket cases ).

 

[ClubMan]

The net effect of the so called "NR debacle" is that they have been/are the institution with the best guarantee for depositors!

 

[Gautama]

...so called "NR debacle" ...

Are you trying to say that what happened to NR last summer was not a debacle?

On July 25th they issued an upbeat set of trading results, saying the outlook for the business was "very positive".

Then on 13th September they asked for and were granted emergency financial support from the Bank of England, in the latter's role as lender of last resort.

(The above two sentences have been googled)

Debacle/crisis/whatever. When a bank almost causes its own self implosion how would you describe it?

... best guarantee for depositors!

Huh? The bank is being run by incompetent people. If they were competent this wouldn't have happened in the first place.

Note to the OP, though going for rates is important, it's worth keeping in mind how well run the bank is. If they are making profits quarter after quarter, then they should be a good bet. If the way they run their company threatens to undermine the UK banking system...

Bottom line, read the opinion on this site, then make your own mind up.

 

[ClubMan]

Are you trying to say that what happened to NR last summer was not a debacle?

Many people who stayed put and failed to join the mob were not inconvenienced. I was one of them. In fact I eventually benefited from their 0.5% bonus for January and February 2008 which meant 5.5% annualised for those two months while other banks were slashing their rates. They messed up big time but it was not a debacle for depositors since nobody lost a cent.

Huh? The bank is being run by incompetent people. If they were competent this wouldn't have happened in the first place.

Be that as it may they are offering a good rate of interest on demand deposits over €1K (and good rates on other accounts) and HMG underwriting a 100% guarantee for all deposits and interest. These are not insignificant issues.

 

[Gautama]

Many people who stayed put and failed to join the mob were not inconvenienced. I was one of them. In fact I eventually benefited from their 0.5% bonus for January and February 2008 which meant 5.5% annualised for those two months while other banks were slashing their rates.

0.5% extra for 0.17% of the year sounds like a jackpot alright !

...pausing for a pinch of salt...

Instead, I moved my money out NR (currently at 5%, previousy at less) to Halifax (securely making 5.22%) and to First Active (securely making 5.15%), and elsewhere.

They messed up big time but it was not a debacle for depositors since nobody lost a cent.

Nobody? How about depositors that were also shareholders?

 

[ClubMan]

0.5% extra for 0.17% of the year sounds like a jackpot alright !

I never claimed it was a "jackpot". But it was a significant premium over what some other deposit accounts were offering. For example this was around the time that Rabo slashed their rates.

Instead, I moved my money out NR (currently at 5%, previousy at less) to Halifax (securely making 5.22%) and to First Active (securely making 5.15%), and elsewhere.

I also have money in those accounts but NR were the fallback for excess amounts over €1K given the attractive deposit rate on offer and the 100% guarantee on deposits and interest.

Nobody? How about depositors that were also shareholders?

This thread is about deposits/depositors so I didn't feel that there was a need to distinguish these from shareholders.