Interest rates on savings are so rubbish right now, that I’m keen to find different ways of making the most of our money.
As the rates on savings accounts and high interest current accounts limbo even lower, turns out there’s a solution on your smartphone.
I opened a fistful of current accounts to earn extra interest, only for the banks to turn round and slash the rates. Cheers for that Santander, Lloyds and TSB.
Now it looks like the Chip savings app can help me earn more interest, on more money, than I could with the current accounts.
Whoop whoop! (I’m easily pleased).
So I signed up for Chip back on March 2, and here’s what I reckon so far.
What is Chip?
Officially, Chip touts itself as an “automatic savings app”.
You let Chip take a dekko at your current account, and it uses whizzy algorithms to analyse your spending patterns, and tot up how much you can afford to save. It then transfers small amounts of money every few days into a Barclays savings account.
This is all well and good, and could definitely help people save more than if they waited until the end of the month, looked at what little was left, and didn’t get round to saving it.
It also takes away the fear that if you set up a standing order to a savings account each month, you risk not having enough left to pay your bills. Plus, it sounds great if your income and expenses vary a lot each month (hands up all freelancers).
However, the bit that really interested me is that you can earn up to 5% a year interest.
YES PEOPLE 5%.
Officially, Chip starts out paying 1% a year. However, if you sign up using a referral code (and mine is 4T0C9I), then your interest doubles to 2% a year. That’s already better than the vast majority of bank accounts on the market.
Persuade other people to sign up with your own referral code, and your rate gets bumped up by an extra percentage point per person, to a maximum of 5% a year.
Alternatively, if you prefer cold hard cash, you can opt for £10 each time rather than 1% interest.
Plus – there’s no limit on the balance.
You don’t have to wait for the app to make savings, but can tell it to shovel across up to £100 a day yourself. Do that for long enough, and you could end up with a tidy sum earning 5%. Sure, if it gets too popular, Chip might change the rules. But right now, that sounds pretty good to me.
Interested? Read on for what I think is good and not so good about Chip.
The chance of 5% interest
Seriously folks, this is pretty much as good as it gets on cash savings. Nearest you’ll get otherwise is 5% on a Nationwide FlexDirect current account on a maximum of £2,500, and that only lasts for a year. With Chip, keep on shovelling across £100 a time, and the sky’s the limit – unless and until they put a stop to it.
The app is quick and easy to download and set up.
Saving is incredibly quick and easy
Seriously, you can save £100 with just 12 touches on your smartphone screen, and that includes typing in a 5 digit passcode. I’ve saved first thing in the morning, while jogging and at a jazz club (don’t judge). Otherwise, if you don’t want to transfer lump sums, you can just leave Chip to do its thing without doing anything further.
The online support is quick and easy to access
It’s just like typing a text or Facebook Messenger exchange. You don’t have to wade through pages of “contact me” forms, and “have you checked out our FAQS?” and “we aim to answer your email in 24 to 48 hours” like normal internet banking. Admittedly, Chip probably doesn’t have gazillions of customers right now, but the live customer support is working pretty well at the moment.
Your money goes into a Barclays savings account in your name
Rest easy, because your hard earned cash doesn’t end up in some strange bank account in the Caymans. If Chip goes bust, you can still get your money from Barclays. If Barclays goes bust, you have bigger problems on your hands because saving this way isn’t covered by the Financial Services Compensation Scheme. So let’s keep our fingers crossed that we don’t face a financial apocalypse that sees Barclays going to the wall, eh.
It promises not to take too much
Chip is so confident that the whizzy algorithms won’t get it wrong, that if it makes an automatic saving that pushes you into your overdraft, it promises to replace the money immediately, pay the bank charges, and pop £10 in your savings account to apologise. You also get notified of transfers, and can cancel, pause, increase or decrease them if you want to.
You can get your money back pretty quickly
According to the Chip website, if you ask to withdraw money before 2pm, you’ll have it back in your current account that afternoon. After 2pm or at the weekend, and you’ll have to wait until the next working day. I haven’t tried withdrawing anything yet so can’t confirm this.
It’s only a chance of 5% interest
You’ll only earn that much if you can persuade other people to sign up with your referral code. Plus, the extra interest only works for a year. Come year two, you’ll need to persuade more people to sign up if you want to keep earning higher rates.
You can’t automate the £100 a day process.
Nope, you’ll have to resign yourself to transferring £100 a day until you run out of spare hundreds. Rats. Plus, it resets every 24 hours, rather than at a set time of day or night. Think about that – it means if you tell it to save at 7am one day, you have to wait till after 7am the next day. Forget to do it till later, and you’ll have to wait until later every day after that too.
There’s a big time delay between you telling the app to save, and the money actually hitting your savings account.
If you’re used to normal internet banking, where the money can switch between accounts faster than you can open browser windows, then Chip is positively glacial. Part of that is because the transfer takes place by direct debit, and Chip says it has to give you a day to cancel a save, and then wait 48 hours before instructing the Direct Debit transfer. In practice it takes even longer than that – currently I have 6 days’ worth of transfers pending.
If you make savings yourself, it delays the automatic savings
If you tell Chip to transfer a lump sum, as I’ve been doing with my £100 transfers, the algorithms throw a wobbly and won’t do any automatic saving for a week or so.
Prepare for emoji overloand
Chip is targetted fair and square at millenials who’ve never known life without the internet and a smartphone glued to their hand. If you’re going to use it, brace yourself for extra emojis, bad puns and gifs aplenty. The most disturbing one is a flirtatious Paul Hollywood.
It only works with 12 banks currently
Fine if you’re with one of the big banks, not so good if you use for example Tesco Bank.
The accounts that are included are (big breath): Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds, Metro Bank, Nationwide, NatWest, RBS, Santander and TSB.
You can only link to a single bank account
If your banking is a tangled mix of standing orders and direct debits from multiple accounts, it won’t cover them all, but only one of them. So choose carefully.
The interest is only paid every three months
If you take money out of your savings account just beforehand, you won’t get credited with any unpaid interest on the withdrawal. So sure, you can get hold of your money quickly, but you’ll need to think about the timing if you want to make the most of your interest payments.
You’re giving an app access to your bank account data
Chip bangs on about encryption and security and data control licences, but fundamentally if you’re paranoid about internet banking this won’t work for you. Also, you’re letting a company look at all your transactions. It may be read only, but they can see what you pay to whom, with the risk of unleashing mammoth amounts of targetted junk mail in future. If you avoid supermarket loyalty schemes because you don’t want someone analysing your spending patterns, steer clear of this too.
Don’t do it if you’re in debt
As with any savings, it’s a bad idea to build up savings if you owe expensive debts elsewhere. If you’re paying more interest on debt than you earn on savings, I suggest using any extra cash to pay down debt first.
Who knows how long it will last?
Just as the banks chopped the rates on high interest current accounts, so Chip could decide at any point that it’s lured in enough customers, and cut the interest paid. Get in fast and grab any interest while you can, I say.
So – over to you? Any interest in saving by smartphone?