the richest man in atherstone

I have been considering changing my savings account for a while now due to the low interest rate of my Lloyds TSB Online Saver (currently 3.83%). The reason I have kept my money in this account for so long is that it is exceedingly convenient to transfer money to my current account as this also resides with Lloyds TSB and the transaction is immediate.

Don't get me wrong. The Online Saver Rate isn't poor. There are plenty of worse products, however there are also quite a few products that are much better.

As I mentioned in my last post, I have a few grand that I need to keep quickly and easily accessible for when we move house.

I plan to keep my £1000 in Premium Bonds as there are five £1'000'000 prizes next month instead of the usual two. I also plan to continue utilising my Lloyds TSB Monthly Saver, which has a rate of 8% (6.4% after tax). This is more than any savings account offers. That leaves me with the £3'800 in my Online Saver. I will keep £800 in there for emergencies (due to the convenience of immediate transfers) and the remaining £3000 will be moved to a better savings account.

Following this thread on the fantastic 'Cash Questions' forum, I decided it would be prudent to calculate how much of a difference changing my Savings Account would make.

Currently, I am earning 3.83% (3.07% NET) on my savings per year. That's 0.0084% per day (3.07 divided by 365). Changing savings account means I would lose out on 6 days interest (3 days to transfer it to the new account and 3 days to transfer it back). That's 0.05% (0.0084 multiplied by 6).

That means that my new savings account needs to have a NET interest rate of at least 3.12% (3.07 plus 0.05) to earn me exactly the same over the course of one year as I would if I left my money where it is. Over a six month period, which is a much more realistic prediction of how long my cash would be in the account, I would need a new interest rate of at least 3.17%

For comparison purposes, you could say my existing account has an interest rate of 3.17%.

Looking at the Savings Account market, the best interest savings account I have found is IceSave offering an interest rate of 4.25% NET (paid monthly). This is more than 1 percentage point higher than the 3.17% I valued my Lloyds TSB Online Saver at and would earn me over £30 more on my £3000 per annum.

On top of this, it would be useful to have an Icesave account up and running in case I should come into any money as it guarantees to keep the AER a quarter of a percentage point (0.25%) higher than the Bank of England interest rate for the next three years.

I should add that ICICI offer the same rate, however, I had a bad experience with them earlier this year and consequently will not be be using them again.

So, I just applied online for the Icesave account, which was very quick and easy to do and am now awaiting my paperwork.

In my case chasing percentage points was worthwhile as it made quite a big difference even after deducting 6 days interest, however, if I already had a table-topping product, it probably wouldn't be worth the effort.