This guest post comes from Sara from Debt Camel. Her site offers free, practical help on debt, budgeting, and information about debt solutions, and we think it’s ace. Sara’s been a volunteer advisor at Citizens Advice since 2001 and is also a member of the Institute of Money Advisers.
If you’re paying off debt, it’s important to try and put a bit of money aside, so it’s easier to cope with unexpected problems and emergencies. There are a host of savings apps out on the market now, but do these work?
This article looks at Chip and Plum, two apps that take the hard work out of saving. They work by automatically moving small amounts from your bank account into a savings account several times a month.
How do Chip and Plum save your money?
Chip (available for Android and iOS) and Plum (available as a virtual assistant through Facebook) both save ‘automatically’ for you. They work by:
- accessing your bank account
- looking at your income and spending patterns over the last few months and working out what you can afford to save (this can be increased or decreased if you feel it’s too cautious, or worried that it’s too much)
- this amount is then taken from your bank account by Direct Debit and put into a savings account for you
- you can take money out of the savings account whenever you want, on the same day or next working day, depending on when you ask for the withdrawal
The key differences between the two of them are:
- Chip is an app that can be downloaded to your smartphone
- Plum works within Facebook Messenger, letting you chat to an ‘intelligent’ AI (artificial intelligence) assistant, a bit like speaking to one of your friends
How do I know they won’t take too much money?
- Both apps are designed to not take out so much you might need to use your overdraft
- Both apps promise to refund your fees if they get this wrong
What if I have an overdraft?
The apps allow you to ask them to save when you’re already overdrawn. In that case their ‘refund promise’ doesn’t apply.
The issue of saving when you’re in an overdraft is tricky. Mathematically it means you may be paying extra fees, but psychologically many people feel their only hope of clearing their overdraft is to put money aside so you can repay it all off at once and then start with a clean slate.
I would definitely say don’t save if you are in an unauthorised overdraft, as the fees are so high.
Are they safe?
With Chip or Plum your savings are kept in a Barclays account. Most people who use mobile banking on their phone will likely find these apps okay, but you should only use these services if you feel comfortable managing your money via an app on your phone or using Facebook Messenger.
Chip and Plum are small start-up companies. They’re both regulated to operate in the UK as agents of the payment mechanisms they are using.
If you aren’t happy leaving your savings with them in the long term, you could always decide to withdraw your money every few months and put it in a different savings account.
How do they make money?
Both are promising they’ll never charge for the service. Both are planning associated services which’ll be optional for you, but you can ignore these and stick with the free savings facility if you want.
Plum intends to use all the data it has on your expenses to suggest utility switching and other services. (Chip is looking at a ‘smart overdraft’ product – it will be interesting to see how that works.)
Do I get interest on my savings?
Chip pays no interest at the start, but if you refer a friend you and your friend can choose between a cash bonus of £10 or increase your interest rate to 1%. The rate won’t ever exceed 5%.
Plum doesn’t pay interest on savings. But it’s currently testing putting some savings into an account with Rate Setter, a peer-to-peer lender. The interest here is variable, currently around 3%. It’ll also take 4-5 working days to withdraw the money and the capital isn’t guaranteed. If you’re concerned about the safety of your savings and quick access, this probably isn’t a good option for you.
What do people think of them?
Pete who blogs at Household Money Saving said:
Money is moved to my Chip account each week automatically. Within a few weeks, I asked for the amounts to be lowered as I found them quite high. This took seconds to do and I saw the amount transferred drop by around 30%.
The language and style used are definitely aimed towards the twenty-somethings, but Chip is a good way for anyone to save.
Faith who blogs for Much More With Less said:
I found signing up for Chip very easy: a few personal details, some bank account info, and I was away. It took a week before Chip took my first savings from my bank account though.
I find Chip much easier to access than other forms of internet banking. It’s also super easy to contact Chip using live chat – much easier than the multiple pages I’d click through with ordinary internet banking.
I’d definitely recommend it to other people. Even my mother could probably manage it!
Eileen who blogs at Your Money Sorted wrote:
Plum feels easy, fun and exciting. I love the fact that it randomly messages to say that it has transferred money into my savings – it feels like a lovely wee surprise when it does that.
I would honestly recommend it to anyone because it really makes saving simple!
In addition to Pete, Faith and Eileen, I know a few more people that have used Chip or Plum, and so far I haven’t met anyone that doesn’t like them.
As to which is best for you, I’d ignore the stuff about interest rates and refer a friend bonuses as these could change very easily. Pick the one you think will work best for you in the long term.
Have you tried any money-saving apps or virtual assistants? What are your thoughts? Let us know in the comments section.