Get £300+ For Free!

Follow these four easy steps to get £300+ for free! But beware, there are some catches...

In four steps, I'm going to demonstratrate how you could make more than £300 this year with hardly any savings, and how the same technique could boost the effective return for people who have substantial savings from 4.5% to around 9%.

While you don't need to have much savings to benefit, you do need the following:

• An income of £1,500 a month (after tax)
• At least one direct debit on your current account

Step one

You begin by opening an Alliance & Leicester Premier Current Account. At the application stage, you ask to use A&L's Premier Switching Service to transfer your standing orders (SOs) and direct debits (DDs).You pay in £500pm (using cash, cheques or income) for four months and within that time A&L will pay you a £100 bonus. Please note that if you do not agree to switch your direct debits, A&L will not pay out the £100 bonus.

Under-65s also get free, annual European travel insurance that A&L values at £60, but comparable cover on the market is about £30. If you were planning in any event to buy travel-insurance (without cover for winter sports, children, golf or hazardous activities) then this is effectively another free gift of £30. (You can upgrade, but A&L doesn't reveal the cost. Ensure you compare travel-insurance prices.)

If you open a joint account, both of you are covered. A similar joint insurance might cost about £40. However, you'd be better off opening two separate accounts, so that you get another £100. Couples will both need to use the Premier Switching Service to transfer SOs and DDs, so plan carefully.

So that's £100 (or £200) you've earned already.

Step two

I don't know if you have to keep your SOs and DDs at A&L for the full four months, or whether you're able to switch again immediately after you've used the Premier Switching Service. The small print isn't crystal. Assuming you play it safe, you'll wait nearly four months to apply for another account. This time you'll switch to a First Direct 1^st Account.

Currently, First Direct (FD) offers £100 to join them, and another £100 if you leave them after six months (but before 12 months). It's made this offer for some time now, so I'm hoping that it will continue to do so in four months, but the faster you get going the better your chances.

Like A&L, you have to use FD's Easy Switch Service to transfer SOs and DDs. You also have to transfer in your salary of at least £1,500pm. Within three months you'll receive the first £100.

Assuming you pay around £1,500pm, the average amount in your account over a month will likely be about half that, £750, as you gradually pay your bills. That figure is necessary for my estimates later.

Step three

Continue to pay your salary to FD, but consider that you need to pay at least £500 to Alliance & Leicester each month to keep your travel insurance. You'll also get 1% interest with A&L. It's not much, but it's more than the 0% you earn with FD. (Your existing account probably pays 0% or 0.1%.) You may need to steadily transfer funds back to FD throughout the month in order to pay each of your SOs and DDs.

If this is one step too far for you, simply skip step three and close your A&L account. But do make sure you close the account, because if you keep it open and fail to fund it with £500 a month, you will be charged an `under-funding fee' of £5 a month.

Step four

Let's say 11 months have passed since you opened the A&L account, and you've been paying your salary into the FD one for at least six months. You can now transfer from that account, and FD will pay you another £100.

The idea behind FD's leaving-bonus offer is that you won't want to leave. Many Fools think FD's service is good enough to sacrifice the £100 plus any interest they'd earn in another account. You have more than six months to make that choice.

Earn interest on your bonuses

By moving your £100 bonuses as soon as you get them, you can earn further interest in a savings account.

Small print

If you're an existing customer of these banks, and even some related banks, you may not be allowed to open accounts. The A&L account is for customers who are `over 21'. (I suspect A&L means `21 and over'.) I've mentioned the terms of these accounts that'll affect most of you, but you'll need to read the small print for more, as always.

The total return over one year

These figures include estimated interest from A&L's account and assume an average balance of £750. If you earn more than £1,500pm the figures will probably be lower, but still impressive.
*If a couple both pay in salaries of £1,500, they could get an extra £200 by opening separate FD accounts, too!

A couple could earn the equivalent of 99% AER, and even a single person should expect to get about 50%. All this without relying on falling interest rates or without tying your savings up in term accounts - because you don't even use your savings!

If you have savings

So far you've earned all this without any savings at all. But let's say you have £10,000. Is it worth this faffing?

Assuming you're getting a fixed-rate of 4.65% on your savings for one year (ICICI Bank HiSave Fixed Rate Account), you'll earn £372pa if you're a basic-rate taxpayer and £279pa if you're a higher-rate payer. Compare with my table and you'll see that, by `faffing', you'll double your gains and effectively double your interest rate! With most people struggling to make 4%, you've done well.

Here's hoping that First Direct continues its offer for the next four months!

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