Recently, First Direct, my long standing current account provider, e-mailed me to tell me that “your money could be earning you more” and “moving money into your savings account could earn you interest”. Sadly it’s barely really true, and certainly isn’t competitive in 2024.
They don’t seem to have noticed that after every pay day, I transfer everything that isn’t going to get sucked out by the standing orders and Direct Debits into a Kroo account. Kroo is one of a number of new kids on the banking block. A new kid that, I hope, is the next big disrupter. Kroo currently offer 4.35% AER on their current account, as they try to appeal to consumers and grab a foothold in the UK’s personal current account market. That market continues to be dominated by legacy providers and consumers who are indifferent or wary of making a switch. Clearly for many the cost-of-living crisis isn’t so bad they are prepared to make this change.
First Direct’s email encourages me to find out more at firstdirect.com/savings. I can barely face wasting my time doing so but it’s important to point out the stark differences between the minnows and the sharks. It’ is clear that HSBC & it’s now aging prodigy, First Direct, have plenty of deposits on their books and really don’t need to offer interest to get more
HSBC, First Direct’s big daddy, is Europe’s biggest banks. In February 2024 it posted an 80% jump in pre-tax profits of some £24bn. But such success sadly does not feed through to loyal customers like me. They pay a credit interest rate on cash held in their current accounts of um…absolutely nothing. Zilch, nada or f*ck all. They have the gall to state that [if you’re dumb enough to have one of these accounts, like I’ve been for the last…25 years…] you can get access to their 7.00% AER/gross regular saver account. Before you rush to get that whopping headline rate, understand that you can only save a maximum of £300 per month and, you must do it for a whole year and, only then will you see any lolly from First Direct. Close it before the full year is up and you’ll get the standard savings rate of 2% AER. Don’t do the maths of 7% on £3600 remember the monthly limit. You’ll never get it. The page about this regular saver account has a heading “What’s all the fuss about?” Indeed…if there was any.
First Direct offer a Fixed Rate Savings Account that does match Kroo’s 4.35% AER, if you keep your money there for 13 months. But woe betide anyone who has to make a withdrawal before then. You’ll be charged £100 for the pleasure of getting your own money and that could seriously dent your returns, if not your capital too. Not really anywhere near a match for Kroo.
You could open a First Direct Cash ISA and get a miniscule tax-free interest rate of 2.85% AER. I think you’d have to have a hole in your head to do so as, an internet search taking less than 30 seconds reveals that, (from that ever-so-trusted resource of moneysavingexpert), you could readily get over 5% AER, tax free at present. I firmly believe returns from a Stocks and Shares ISA will be better but only if left there for some years. Don’t rely on Stocks and Shares ISAs if you think you’ll need to withdraw sooner than at least 5 years. The markets yo-yo and you don’t want to be forced into withdrawing in a dip. Although generally incremental returns get higher over time, these are long-term savings, and this is individual advice. Let’s get back to cash.
I’m quickly got bored wading through First Direct’s website. I know there will be no pleasant surprises there. Fortunately, there are other places to put cash that are similarly easy to manage via your phone. Again, just look at moneysavingexpert. Barclays are beating Kroo with their current account interest rate, though only on deposits up to £5,000 and it comes with various other strings attached that complicate matters. It’s probably not the right place to have a huge emergency roof fund earning interest there. Kroo’s maximum balance is half a million though I’d recommend limiting your deposits to the Financial Services Compensation Scheme’s £85,000 safety net – as if anyone reading this has half a mill to put into their current account anyway! It’s probably not a great idea to keep a massive balance in your current account in case you’re unfortunate enough to experience fraud, in which case the fraudster could have easier access to your whole life savings. There are several other places where you can readily save around 4.5-5% AER that are not current accounts but if you want the convenience of an app-based current account with a debit card that can process Direct Debits, standing orders and all that you’d normally expect, then you can’t go far wrong with Kroo. If you need a weak green bribe, Kroo say they’ll plant two trees for everyone who opens an account. If you want hard cash, the first few people who use this link will get £10 and so will I.
If you use financial software to monitor your spending you may be frustrated by Kroo’s lack of anything but pdf statement downloads but it’s a new bank and it is adding functionality all of the time – for example, it recently added ‘pots’ to jam jar your money and has started to offer loans. You may also not want to trust me when you know I made a micro-investment in a Kroo crowdfunding drive a few months ago. I figured with a current account interest rate deal like this they should do well in terms of appealing to customers, who, like myself, are fed up with the established banks taking us for a ride. If you think that’s a conflict for this First Direct induced outburst, then rest assured that I will have invested much more in the shares of HSBC and all the world’s top banks via index trackers. With time-wasting emails like the one I got from First Direct, it is time I got all my money out of there. They’ve highlighted they have as much interest in keeping me as a customer as I have in staying. If you have accounts with them – or any other of the dinosaur banks – then you should too. These days swapping banks is quick and easy via the Current Account Switch Service. The banks do all the work and if you don’t want to trust them to do so, open up with Kroo and do it yourself gradually. I think you’ll find the experience… interesting and rewarding.
March 24
If you like this and through it have realised it’s time to dump your legacy bank please consider buying me a coffee!
ShaunOConnell.com 