Postal accounts have the stamp of a better-value deal: Caroline Merrell tells why some savings vehicles pay twice the rates of others

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The Independent Online
INTEREST rates offered by postal accounts are in many cases more than double those offered on equivalent branch-based accounts.

Postal accounts can offer a convenient way for building society customers to keep their money. Using the postal service or telephone to make withdrawals or deposits cuts out the need to travel to a branch.

The building societies are able to offer better interest rates because the lack of branches means they are able to cut down on the administration costs of running the accounts.

As interest rates have tumbled, the differential between the rates on postal accounts and those offered through branches has become a much bigger percentage of the overall return.

Anyone who wants to open an account is usually supplied with prepaid envelopes and stationery. Most accounts also have a telephone facility, which means account holders can make withdrawals over the phone.

Most societies with postal accounts offer 24-hour turnround on transactions.

Building society customers who want to use this facility will be issued with a password or a pin number to ensure security on their accounts.

This week National & Provincial announced that it is to offer its 2.5 million customers the option of operating its accounts by post, but it has no specific plans to offer a postal account.

A society spokesman said: 'Higher postal account rates, which are often short-lived, come not from lower operational costs but from interest that would be paid to existing branch managers.'

Nationwide Building Society also has a postal account that offers a rate of interest 1 per cent above the equivalent branch-based account.

Anyone using Nationwide's postal account is also offered the facility of a cash card, which allows withdrawals of up to pounds 250 through the 5,000 machines in the Link network.

Account holders can also deposit money in 750 Nationwide dedicated cash machines. Using the cash card does, however, incur a cost of pounds 1.

Nationwide's account does not offer a telephone option.

Bradford & Bingley is reopening its direct notice account this weekend. This is the 30-day notice equivalent of its Direct Premium account. The reopened account will offer gross interest rates of up to 6.75 per cent.

The new account does not have the telephone facility offered on the Direct Premium account.

A society spokesman said: 'We provide envelopes and stationery. Account holders that use the telephone option will only be charged at the cheap rate.'

He added that everyone sending in cheques would be sent an acknowledgment.

Cheltenham & Gloucester Building Society recently converted its London share account to the London deposit account. This account offers a telephone facility from 8am until 8pm five days a week and from 9am to 5pm on Saturdays.

The society also offers 24-hour turnround on deposits and withdrawals.

----------------------------------------------------------------- RETURNS ON POSTAL ACCOUNTS VERSUS ----------------------------------------------------------------- BRANCH-BASED ALTERNATIVES Building Postal % interest Branch % interest Difference society account on pounds account on pounds % 5,000 5,000 Bradford & Direct 5.40 Timesaver 1.85 3.55 Bingley Premium C&G London 5.45 Chelt'm 2.25 3.20 Deposit Gold Bristol & Balmoral 5.75 Select 2.90 2.85 West Yorkshire 1st Class 5.55 Golden 2.90 2.65 Access Key Norwich & Postmaster 5.00 High Rise 2.40 2.60 Peterborough Nationwide InvestDirect 5.00 CashBuilder 4.00 1.00 N&P Instant 4.00* Instant 4.00 0.00 Reserve Reserve ----------------------------------------------------------------- *postal facility (ie account not post-only) Source: National & Provincial Building Society -----------------------------------------------------------------

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