Written by Karen Bryan
I was attracted to the Nationwide Flex Direct current account by the 5% fixed rate paid for the first 12 months. Unfortunately the maximum balance for the 5% rate is only £2,500; you get no interest on anything above the £2,500 threshold. Plus you have to pay in at least £1,000 a month to be eligible to receive the 5% interest.
Another reason I thought it might be worth opening a Nationwide Flex Direct account was that I’d then have access to exclusive products, e.g. slightly higher rates of interest paid on a Cash ISA account.
I had to judge whether I should open a Flex Direct account. I could earn £125 gross interest (£100 net after paying 20% basic rate income tax) if I kept £2,500 in the Flex Direct account for 12 months from the date of opening. The highest rate currently available on instant savings accounts is 1.75% from ICICI Bank UK, which would only give me £43.75 gross interest (£35 after paying 20% basic rate income tax). Therefore I’d be £65 better off by opening a Flex Direct Account than having the money in an ICICI Bank UK instant access account.
I’d set up a standing order from an account with another bank (internal Nationwide transfers don’t count toward the £1,000 minimum monthly payment) to pay in the £1,000 a month into the Nationwide Flex Account. Then another standing order to withdraw the £1,000 from the Flex Account back into an instant access savings account. There’s no point in keeping a penny above the £2,500 threshold in the Flex Direct. As the transfers in and out of the Nationwide Flex Account would all be automated, I could just set them up and forget about it.
I’m not sure if I’ll bother opening a Nationwide Flex Direct current account. You can over-complicate your finances.
I already have two current accounts. A Halifax Reward Current Account which pays me a £5 (net for basic rate taxpayers) monthly bonus as long as I pay in £1,000 a month (which can include internal transfers) and have 2 monthly direct debits set up. My other current account is a Santander 123 Cashback Current Account which pays 3% variable (gross) on balances between £3,000 – £20,000. The Santander account has a monthly charge of £2 and I have to pay in a minimum of £500 a month into that account (excluding internal transfers). I get cashback on household direct debits such as 3% on telecoms and 1% on council tax.
I’ve also reviewed the Nationwide Flex Plus Current Account.
Update 14 August 2013 – I’ve opened a Nationwide Flex Direct in order to get the fixed rate of 5% on a balance of £2,500.With interest rates so low, I decided that the rate of interest was too good to forgo. I made an initial deposit of the full £2,500. The minimum £1,000 monthly payment into the Flex Direct account is made by standing order from my Halifax Reward Current Account. The day after it’s paid in the Flex Direct account, the £1,000 is automatically transferred into my Nationwide Regular Savings Account which pays 2.5% variable, as long as the balance of the account increases between £500-£1,000 per month.