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Monthly PAY-IN current accounts

Last Edit: 11/06/18

Due to the 2007–2008 financial crisis, and the subsequent policy of low interest rates (base rate) initiated by the Bank of England, it has become interestingly difficult for UK savers to find a decent savings rate -- especially so when its an easy-access current account. Presently (2018), the 'best' standard easy access current accounts provide an interest rate of 1.30% -- a rate that has broadly remained at a similar level for the past 3-5 years. However, there is another option to achieve a decent rate of interest, and that's with a monthly PAY-IN current account: these accounts require customers to pay a certain amount of funds, per month, for a set period of time, which will result in a bonus perk interest rate. A typical monthly PAY-IN account will require savers to deposit £500 per month for an interest rate of 2-5%.

RBS Vantage Card has PAY-IN feature

RBS offer the Royal Bank of Scotland Vantage Card with a PAY-IN feature

So that's great news, time to open a monthly PAY-IN account? not so quick, there are a number of drawbacks with these accounts. Firstly, there is a limit to the amount of funds that can be placed in a PAY-IN account that will receive the bonus perk interest rate. For example, the TSB Classic Plus account has an excellent 5% AER variable interest rate, but it only applies to balances up to £1,500. It would also appear that banks have been lowering the threshold for the bonus perk interest rate: in 2014 the Guardian reported that the Bank of Scotland and Lloyds provided PAY-IN accounts with a £5000 threshold and TSB had a PAY-IN account with a £2000 threshold -- although it has to be acknowledged that monthly PAY-IN accounts tend to differ slightly in their features, and it makes a direct comparison (2104 to 2018) difficult.

A second drawback to monthly PAY-IN accounts is that some of them do not pay interest on funds over a set limit; for example, the Bank of Scotland Vantage Classic Account pays 2% interest on balances up to £5,000, but it will not pay interest on any amount over £5,000. Therefore, if you placed £10,000 in this account, you'd have better off placing those funds into a regular current account with a 1.3% interest rate; such as Paragon's Limited Edition Easy Access, which allows you to save up to £100,000 at an interest rate of 1.31% AER (variable). AER stands for Annual Equivalent Rate and emphasises what the interest rate would be if interest was compounded over a year.

Therefore, while monthly PAY-IN account can potentially increase the amount of interest you earn, it will depend on how you use them -- specifically not exceeding the threshold of the bonus perk. If you are planning to save a large sum of money, it will require you to open up a range of PAY-IN accounts, and you will have to ask yourself whether the effort of doing so is worth the extra interest you may receive. Presently, the following monthly PAY-IN accounts are available: TSB Classic Plus; Bank of Scotland Vantage; and the Halifax Reward Current Account.