Where to Find the Best Paying Charity Accounts

If you are looking at charity savings accounts, you may not be too excited by the interest rates that they currently offer.

As a result, the hard-won funds of your charity may only be earning an inadequate amount of money… but it does not have to be that way!

While well-known banks and building societies do not tend to give the best rates on the market, there are other providers that you can choose from. As a trustee, you will need to be prepared to shop around to discover the best charity savings rates.

If you take the time to look, there are a number of higher-paying accounts that are available to charities, with the majority being granted by providers that are smaller and lesser-known.

The best rates on charity deposit accounts will be given when your organisation:

  • Can commit to not having near-term or immediate access to its funds. Fixed rate and notice accounts offer higher rates than accounts allowing easy access.
  • Consider Business Deposit Accounts as an alternative
  • Has a sizeable amount of money to save. For example, charities with £50K to invest will presumably secure better interest rates than those with more modest amounts to invest.

See:  The Basics of Business Deposit Accounts

What is a Standing Order?

A standing order is a method of establishing a regular, fixed payment from your bank account.

You can schedule a payment to be taken at a determined regularity (for example, the 3rd of every month) and for a set amount of time, such as three months. Your payments will consist of money that is set at an amount that was chosen by you.

You can usually set up a standing order by accomplishing a standing order form and submitting it to your bank or arranging the standing order over the phone, in the branch, or by using online banking.

What is the difference between a standing order and a direct debit?

A standing order is basically an instruction to your bank, whereas a direct debit, on the other hand, allows a company to take money from you. You are the solely the only person who can change the payment amount or the date on your standing order. This is the principal difference to a direct debit, where these circumstances can be changed by the organisation or the person that you are paying.

What if I do not have enough in my bank account to pay for a standing order?

If there is not enough money in your account to pay for a standing order, you may be allowed to take advantage of a buffer zone, if your current account includes one. This is essentially a small interest-free overdraft that your bank would not charge you for if you sneak into it.

Your bank or building society may refuse to pay for the standing order if you exceed the buffer zone. They may also charge you a fee. You may also be asked to pay for additional charges if paying for a standing order pushes you into an unauthorised overdraft.

If you already know beforehand that you would not have enough money in your bank account, the safest thing to do is to arrange an overdraft that is temporary with your bank in order to pay for the standing order. Alternatively, you could attempt to negotiate a later payment date with the person in question.

If you regularly miss standing orders, you should consider paying by a different method or changing payment dates.

How long will it take for a standing order to reach the recipient?

The Faster Payments service can be used to make standing orders which means that the payment can be received on the same day, or the next working day if the payment is made on a bank holiday or a weekend. If your bank does not make use of Faster Payments, it may take three working days for a standing order payment to transfer from one bank account to another.

How do I cancel a standing order?

You are the only person that can opt to cancel a standing order. You can cancel a standing order at any point in the branch, via secure online banking, or over the phone or. You will have to make sure that you inform the person or organisation that is due to receive the payment before you do, as you could incur penalties or fees for non-payment. Remember that if you do not pay a bill on time, this could also have an effect on your credit rating and appear on your credit file.

A Guide on Savings Accounts

Savings accounts come in various forms. However, they all aim to build up a lump sum of money that you can use for whatever purpose that you like.

You may be saving for to build up an emergency fund or for a specific purpose, or just for a rainy day.

Savings accounts normally come in the form of deposit accounts, which lets you earn interest on the money that is held in the account. Providers will then use that money to lend to other customers in the form of mortgages, loans, and credit cards.

Most people perceive savings as regularly putting a little money away to build up a large pot of money. However, there are some savings accounts that allow lump sum amounts and intend to increase the value of them.

Different types of savings plans

There are a lot of shapes and sizes of savings plans such as:

  • Cash ISAs allow you to grow your savings tax-free.
  • Internet savings accounts are specifically run over the internet. Interest may be slightly higher since the accounts are cheaper to run.
  • Instant access savings accounts allow you to have immediate access to your money without any penalty.
  • Notice savings accounts require you to issue a notice of withdrawal. You will be penalised by a loss of interest if you cannot provide the notice period that you need to, and in some cases, you would not be permitted to have access your money early at all.
  • Children’s savings accounts or specialist over-50’s savings accounts may have several features that you (or your kids) will be able to benefit from.
  • Savings plans can be on a fixed interest rate or variable interest basis.
  • Offshore savings accounts allow you to receive interest gross or even defer it to manage your tax liabilities.

How savings providers make their money

National Savings Accounts that backed by the UK Government include a number of tax-friendly accounts for children and adult.

There are no charges to set up a deposit savings accounts and normally no fees either. Providers make their money by making use of your savings to lend to other customers at a rate that is higher.

You may be penalised for early withdrawals on a notice account, which saves the provider from paying a certain amount of interest, thereby increasing their return.

Taxation

From April 6, 2016, people who earn under £150,000 will receive a Personal Savings Allowance, which means that the first portion of interest that is earned in a tax year is tax-free. If you are a basic rate taxpayer, this amount is £1,000, and if you are a higher rate taxpayer, it is £500 (taxpayers with highest rates do not receive an allowance).

However, you must be careful as this does not just apply to normal savings accounts. If you earn interest on investments, such as Government gilts or corporate bonds, or if you receive an income from any fixed interest investment funds that are classified as ‘interest dividends,’ then they will also be included in your £1,000.

This allowance does not apply to some National Savings & Investments products and cash ISAs, as these are already tax-free anyway.

If you earn some money over your allowance amount, you will be required to declare your interest to the HMRC and pay any tax that is due.

Read also: Can You Still Receive a Decent Return on Your Savings?

What Is an Overdraft?

In layman’s terms, being overdrawn, or getting an overdraft, is when you exceed the amount that you have in your bank account.

Being overdrawn is normal, but picking the wrong current account can mean paying far more than you should in charges when you overdraft.

Types of overdraft

An overdraft is distinguished into two, and the difference between them is fundamental:

Authorised overdraft

Authorised overdrafts are pre-arranged with your bank. If you have an authorised overdraft, this means you have set an overdraft limit for your account. You will typically have to pay a fee or an interest in return for using an overdraft facility, although some banks do give interest-free overdrafts.

Unauthorised overdraft

This is where you have not consented to an overdraft facility with your bank in advance and have spent more money than you possess in your account, or you have used more than your authorised overdraft limit.

Unauthorised overdrafts should be avoided because they are usually subject to fees which can be costly.

Taking advantage of an overdraft

Overdrafts can be a helpful way to loan small amounts of cash for a short period. However, overdraft is not an effective way of borrowing in the long-term, because they almost always come with a higher interest rate than some loans and even some credit cards which are already high.

It can be helpful to have an overdraft facility arranged with your bank even if your current account is constantly on credit.

Having an overdraft can play as a buffer to avoid fees for unauthorised borrowing if you accidentally overspend or find yourself needing a little more fund. Accounts with fee-free overdraft are useful for this type of technique.

What to do if you depend on your overdraft?

If you are constantly overdrawn or regularly go overdrawn without authorisation then you should check to see if you are getting the best deal on your current account, as you could be spending far bigger than you need to in fees or charges.

If you have a large overdraft and you cannot or do not want to shift to an interest-free overdraft account, you could consider switching your overdraft to a less expensive type of loaning.

You could consider getting a personal loan (secured or unsecured loans) at a moderate rate of interest than you are spending on your overdraft.