New Savings Account on the way!

I would expect the 1.25% account to be shut down at some point - the bonus is paid from the marketing budget rather than lending income so it doesn’t make much sense to keep paying this indefinitely.

The 0.7% account is presumably sustainable.

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I think it depends on the type of user.

I suspect you have at least two types of user.

One will be the type of user who uses the Chip autosaving AI. For this type of user I don’t think the account fee should really come into their thinking when considering the value of interest paying accounts as they would be paying the fee anyway in order to access the autosaving tool. This account seems a good option for this type of user regardless of the limit.

Another type of user will be the type who doesn’t need the autosaving AI. For this type of user the £1.50 per 28 days account fee simply becomes an entrance fee to unlock access to certain interest-paying accounts. For this type of user the fee should come into consideration when considering the value of that account. If we consider the effective interest rate after subtracting the account fee ((interest earned - account fee)/principal), by my calculation a customer would need to be able to deposit £39,000 to break even with the next best easy access account on the market (0.65% AER)**. So I suspect the account won’t be particularly appealing to people who don’t actually need the autosaving AI or some other feature unlocked by the account fee.

** I’m assuming the 0.70% quoted earlier is the AER of the Chip account.

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Wait! I just saw the new account in Chip a few hours ago. I’ve now withdrawn some money to save into it but it’s disappeared again! WTF? Is that a subtle way of saying it is now full? The utterly useless HTB account is still sitting there in clear view, telling me it’s at full capacity but the new 0.7% account has gone all invisible again! What gives?

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Have you tried scrolling down? Mine was hidden till I did that.

Hello. Re the 30k cap. Andy over at BeCleverWithYourCash has done the sums on the interest rate plus fee vs the next best easy access account (Tandem at 0.65%), and it looks like even maxing out the 30k doesn’t get you a market leading return when the fee is taken into account. I’m not going to get anywhere near the 30k so am sticking with ChipLite and the 1.25% account, but I thought that might be interesting for others.

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There’s nothing to scroll down to. It was top of the list of three when I saw it.

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I haven’t heard of this happening before I’ll look into this. The account is most definitely not full, it hasn’t opened to the general public yet.

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I think he means the HTB is full. Ie not open to new subscribers. Which is correct

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0.7% is the annual equivalent rate!

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Does that mean it takes into account the £19.50/year fee and works out as equivalent to 0.7%? If so, what is the actual interest rate before accounting for the fees?

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The interest rate is the same regardless of the fee.

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Your point about the other type of user just interested in the account is a fair one. I will pick this up with our product team . The reaction to the £30k limit across all our communities have been overwhelmingly positive. But what you are saying makes a lot of sense. I think we will launch with this cap for the time being, if it causes a stir with Tandem then we will most likely readjust from there.

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What is it equivalent to then? If interest is 0.7% but there is a £19.50/year fee, it becomes the equivalent of non-fee accounts paying less than 0.5%

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I don’t think there is any requirement to account for account fees in published AERs.

It simply represents the annual rate of interest after accounting for any compounding across the year. It makes it easy to compare accounts that pay interest and compound in different ways.

If you feel it’s relevant to take into consideration account fees you need to do that yourself.

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The blog post says

“To get the daily rate our partner bank simply divides 0.70% by 365.”

If the AER is 0.70%, this can’t be true. If interest is paid daily and compounds within the year, the simple daily rate must be less than 0.7/365.

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Tough question to answer because it entirely depends on how much you deposit into the account.

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The AER is published in the deposit information sheet as with all savings accounts.
You can find this by going into the Account > Settings > Terms & Conditions > Allica

The copy is as follows (this site won’t let me add screenshot)

What is the interest rate?

0.7% Gross*, 0.7% AER**
Interest is calculated and paid daily to the Deposit Account. You’ll earn interest on any amount you withdraw from your Account until the calendar day prior to your withdrawal instruction.
This is based on a 365-day year. In a leap year, the Deposit Account Provider will add an extra day of interest on 29 February and include it in the next interest payment they make to your Deposit Account following that date.
Interest will begin accruing no later than the first business day following the day when your money arrives with the Deposit Account Provider. This can take up to 24 hours from the point of your instruction. This means that if you send money to a CHIP Savings Account on Monday, but the Deposit Account Provider doesn’t receive the money until Tuesday, you’ll start accruing interest no later than Wednesday. It also means that if you send the money on a day the Deposit Account Provider is closed, it may not receive your money until the next day on which it is open.
Interest is calculated daily on the cleared balance in the account, using the interest rate applicable on that day, and is paid daily.
Gross is the rate of interest payable before any income tax is deducted. **AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

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Hi :wave: Paul and @FredChip
I know the possibility of lifting the £30k cap on the Allica Bank to £85k has been mentioned. Are you able to say, if this were to happen, when it would be likely to be lifted please? Later this year for example? Or quite soon? TIA.

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Hey Laura,

We are sticking with the £30k cap for the time being, this is because we have a different cap on how much money can put into the new Allica account in total! This cap is in the tens of millions. But considering the account has only been available for a few day and we have already seen 8 figures deposited in, we feel that if we were raise the individual cap from £30k we would see the total cap hit too soon. The £30k is there so people can make a good return, but it is also in place so more people have the opportunity to make a return with this account, more so than if the cap was £85k.

If we had seen a slower reaction to this account we would be more inclined to raise the limit. Let me know if that clears things up for you.

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Hi Fred - it does, thank you :blush:

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