Making the most of Current Accounts and Credit Cards
This is a guide informed by personal experience of setting up my personal finances using switching, credit card selection and setting up a network of current accounts to take full benefit of the interest, freebies and perks on offer by meeting the eligibility requirements. In the past year, I estimate I have made an extra £1192 on banks and £230 on credit cards not including freebies like travel insurance, cinema tickets and Clubcard points. Now that many rates have dropped it is a bit harder but I still believe worthwhile, so I hope that I can help the community here navigate their way to more financial freedom through intelligent money management.
I welcome your feedback and any ways you see that this can be improved. Thank you to the original thread commenters for the suggestions, and in particular to emorrp1 for his contributions included in the guide.
I have organised this into 3 sections – ideally you want to create an intelligent money efficient ecosystem that maximises the benefits to you, so I will split this into parts that you can tackle individually, but if you can get them all to work for you and your circumstances that’s the ultimate goal. I find this is best if treated like a game as the banks keep switching things up. Be aware that it will take some project management, but if you put in a little time you could see great benefits.
The Money Efficiency Ecosystem
- Switch Rewards – switching to different bank accounts tactically to obtain a cash sum or reward, usually £100 or so
- Longer Term Banking Ecosystem – qualifying for and opening multiple bank accounts from different providers to access their benefits relative to your situation, such as higher savings, cashback on bills, insurance and free stuff (e.g. cinema tickets)
- Credit Card Selection – selecting the optimal credit card for you, where you can benefit on expenditure you would make anyway and potentially improve your credit score e.g. cashback, airmiles, Tesco Clubcard points, Quidco
- Foundation – Switch Bonuses
- Basic Bank Accounts
- Direct Debit Qualifiers (please note they charge you for this service)
The banks bribing you to switch to their accounts are fairly well established now, with the MSE link above providing the most up to date list of offers. These offers keep changing, so essentially you want to have some available or dormant accounts set up and ready to switch to these and claim the benefits, but you have to be intelligent about it as sometimes you may wish to keep an account if the benefits are worth it. This section focuses on simply getting the bonus element, the next section is a bit more complicated and looks at how to weave this into a broader network of accounts to gain max benefit from the switch and the host of other benefits bank accounts provide.
- If you already have some accounts you don’t use, don’t cancel them, switch them and make some quick rewards – I switched my old student NatWest account I had but never used. Or, create a basic account with some banks you may already be with – usually a few clicks on online banking.
- If you don’t have an initial account to switch from, I recommend finding some basic accounts with no frills to apply for, such as Tesco Current or Santander Everyday. Make sure when you apply to check Quidco and never choose an overdraft facility as it may show on your credit file and affect your rating.
- Bear in mind setting the initial accounts may take time – you may prefer to have some ID and proof of address handy and simply walk into your high street branches to get their most basic fee-free accounts. Now you are ready to pursue the switch.
- Before applying check the account eligibility criteria and plan how you will achieve it –
- Accounts requiring minimum pay-in: set up a Standing Order from original bank to new bank and another from new bank to original bank – three calendar days later avoids weekend delays if the new bank isn’t going to be holding a balance. This gets more advanced in the next section for multiple accounts. No internal transfers between the same bank, use different banks to do this. If you can’t afford the full pay-in e.g. £1500pm, then 4 SOs for £750 can shift the money over the course of 9 calendar days – then again, maybe you should have an Emergency Fund before trying this.
- Accounts requiring direct debits: for just acquiring the switch bonus keep it fast and simple, use whatever direct debits you have have and don’t need and if you need any additional ones use Little Debits to select the amount per month and cancel once qualified. More advanced tactics for longer term use in next section.
- Keep a record in a spreadsheet of where your pay-ins and direct debits are going and coming from so you don’t need to log-in and check.
Once you have applied for your switch reward account and been successful you normally have to register for internet banking, opt-in to paperless statements and prove your ID/address either by post or in branch but not always. The switch itself is relatively easy and should just take 7 days. Reward pay-in varies from bank to bank but once you’ve received it you can then immediately plan your next switch. Some banks provide an extra bonus if you stay a certain amount of time so it’s up to you if you wish to do this. I chose to do so as I had other accounts ready to pounce, but if you are struggling with meeting eligibility as it is it may not be worth it.
- CASS requires the old account to be closed (you don’t always have to use CASS), but most providers allow you to open secondary feature-less accounts – Santander do it instantaneously so this is recommended.
- Open a dummy account to use just for switching from one bank to the next to the next, or just keep opening secondary accounts with your original bank once the switch has completed – By never closing the last current account with a provider, even if they no longer offer any interesting products, you keep access to online banking and are able to respond quickly to new offers.
Remember, this guide is focusing on the throwaway short term accounts. The next looks at accounts you may wish to keep, that may or may not have the additional benefit of having a joining bonus.
Longer Term Banking Ecosystem
Before attempting this one, I recommend you have at least £1500 of liquid cash and an emergency fund, certainly you will benefit most if you have between 3 and £20k. This is a more advanced look at how to benefit from switching banks, but also includes the additional benefits you can get from acquiring and keeping multiple bank accounts and how to manage them so that you stay eligible for all of the benefits at once in the long term. Essentially, this takes a good assessment of your current situation, some strategic planning and a little project management of your accounts. In conjunction with the previous switch guide, what you want to do here is look at the other accounts you will find beneficial to keep in the longer term. Use the Best Bank Accounts Comparison as a good starting point.
Selecting Accounts and Benefits
I would advise on creating an account and benefit ecosystem that is tailored for you and your circumstances. The following is the order I would approach selecting accounts:
- 1 Cashback Account for bills – if you manage the bills it makes sense to get an account that gives you cashback on them. I chose the Santander 123 account as my bills account because in addition it gives me cashback on my Santander mortgage as well as interest, even if that has gone down.
- 1 Packaged Account for insurance and benefits useful to you – if there is a bank account which has multiple benefits you are likely to use at a reasonable cost go for it. I travel a lot, like a good smartphone, have a car and am kitting out a house, so the premium travel + phone insurance, breakdown cover and extended warranty of the Nationwide Flexplus is ideal
- 1+ Higher Interest Accounts with or without additional benefits – these accounts are useful places to park your cash for the highest interest if you still wish for your cash to remain accessible. Whether this is your sole focus or only an option, you may wish to use the Bank Account Savings Calculator and by plugging in the amount you have available select the optimum accounts to max interest in a current account or regular saver. Bear in mind that some of these might also have additional benefits worth considering, such as the Lloyds Club account which gives 6 cinema tickets, a magazine subscription or Gourmet Society membership.
- Any other accounts that gives a net positive benefit or ongoing bonuses whilst being manageable and that you can remain eligible for just for jumping through their hoops – for instance if you have a Barclays account and add Barclays Blue Rewards for the £4 a month, or Halifax Rewards for £3 a month. I have both.
The same eligibility criteria advice for switch accounts applies, however as you are likely to have more accounts in action for a longer time you really need to plan how you qualify for all accounts at once.
Set up a Standing Order from original bank to new bank and another from new bank to original bank – three calendar days later avoids weekend delays if the bank you are transferring into isn’t going to be holding a balance. As opposed to simple switch reward qualification, the most efficient tactic is to send this round in a cyclic loop so that all pay-ins are satisfied in the shortest amount of time, and make multiple Standing Orders that can run without any further intervention.
Minimum Pay-in Example
I set up all of my transfers for the first two weeks of the month, as this maximises the amount of money after pay day I can play with and allows me to fix anything before the end of the month if I need to change anything. The following example shows how I create a cyclic loop of standing orders in order to satisfy multiple pay-ins in a short amount of time. You can make this as simple or as complex as you like, but make sure you keep a record.
Key: Bank(£amount sent-day of month)
Barclays (£500-1st) -> Santander 123 (£500-4th) -> Club Lloyds (£750-7th) -> Halifax (£750-10th) ——> Barclays (end)
Barclays (£1000-1st) -> ——————————> Club Lloyds (£750-7th) -> Nationwide (£750-10th)–> Barclays (end)
Make use of any and all monthly DD’s you have, including credit card payments, subscriptions, bills etc. Remember also to allocate direct debits to the best accounts, for example those which give you cashback on them.
Then, the following options in order of recommendation to fill empty slots are:
- Little Debits for ease and speed. This is at a cost of 75p per Direct Debit, but it is quick to set up each one, has a useful quick option if you want to qualify before the end of the month, and a proportion goes to charity. I’d recommend using this first for speed, but setting up the Tesco option in the meantime and either switching to that when ready or using both.
Tesco Internet Saver is slow as you have to set up another account, but it doesn’t cost anything and once you have you can set up direct debits for 3 different banks accounts with up to 4 on each (if you do one per week).UPDATE – Tesco no longer offer the facility to make savings by direct debit.
- Charities are also an option; however I have moved away from this completely due to the high level of spam and follow up calls you get. Oxfam have hounded me so much I had to block them.
Direct Debit Example
Barclays -> 2DD’s -> AMEX Credit Card + Tesco Credit Card
Santander 123 -> 2DD’s -> EE Mobile + Santander Mortgage (+ eligible cashback: water, council tax, electric)
Lloyds Club 2DD’s -> The Week Subscription + Little Debits
Halifax -> 2 DD’s -> Little Debits x2
Nationwide -> none needed
Cooperative -> 4 DD’s -> Little debits
- Open your accounts tactically, working through accounts you just want to switch for the quick reward, and which ones you would like to keep more long term
- Have at least one dormant account on hand for switching in case a new deal becomes available
- Make sure you meet all the eligibility requirements and that you can manage all of the accounts you open to their potential
- Record everything so you know where you money is going and when
- Reap the benefits of your smart banking ecosystem, monitoring it every now and then to make sure it is all working well
Credit Card Selection
Having a strong rewards or benefits credit card is a great addition to your money ecosystem, but by no means required. Even though I am averse to debt, if used intelligently I like this solution because it gives you rewards for expenditure you would incur anyway, it provides additional direct debit(s) to qualify for bank accounts as well as more buyer protection for purchases above £100 and sometimes additional freebies like access to gig tickets etc. If used correctly, they can also help you improve your credit score.
I personally use the AMEX Platinum Everyday for the cashback element but you may prefer other rewards you can find in the MSE page resourced above. I also have a secondary card as AMEX is not always accepted, so I use the Tesco Clubcard Credit Card for that and when I shop in Tesco. From experience using this for a year as a backup and grocery card I received £30 in end of year vouchers, even whilst out of the country for most of the year. You may prefer airmiles, nectar points etc but I like cold hard cash or Amazon vouchers.
- Apply for the credit card on the respective website, making sure to check on Quidco if you can get an additional bonus for it (got £25 for AMEX and £30 for Tesco)
- Provide any additional docs and ID (AMEX wanted bank statements, Tesco didn’t)
- Use as normal expenditure i.e. main card and if you can, tactically use any high cashback periods if you have large purchases coming up e.g. additional 1.25% cashback for first 3 months of AMEX.
- Pay each month by direct debit – savings will be wiped out if you do not pay in full every month, unless you have tactically used a 0% card for a period of time
I use two free credit reporting services Noddle and ClearScore to monitor the effect my actions have on my credit score, but more so to flag any anomalies or elements that might need improvement. Switching and opening new accounts should not affect your credit score much at all and in my experience only done so if I applied for an overdraft facility by accident. You may also choose to use the MSE Credit Club to view your Experian credit score, however I have found it less intuitive to use quickly.
Long Term Saving
Consider how all this can fit in with your longer-term saving – I also contribute to my HTB ISA while I do this and which I will convert into the LISA when it becomes available. Make sure this suits your circumstances and remember there are many ways to save!
Do record everything you do for future reference. Try and use an encrypting password manager to generate/record all the online passwords, recovery questions, pins etc or have some form of secure recording of your banking details. At first I had a password protected spreadsheet but upgraded to a password manager.
Do pay heed to other elements of the wiki in conjunction with this advice. Paying off debts and establishing an emergency fund still remain top priority before you attempt much of this, but consider this guide a mini-game you can play on your path to financial freedom.
I hope you find this guide helpful and informative, if you can give me feedback or elements to improve I would be happy to. Please consider this a first draft.
Content submitted by /u/hobowithadeposit