Five Questions About: Savings bonuses

  • @simonnread

Bonuses? I thought only bankers got them.

Not at all, they've been used by savings institutions to make paltry-paying accounts seem attractive for years.

Ah. So they're a gimmick to flog accounts?

Exactly. A typical trick is to launch an account paying 0.5 per cent, but include a 2 per cent bonus for the first year to make it look competitive.

Does anyone fall for that sort of trick?

Millions of savers desperate to squeeze as much as possible from their nest eggs have been tempted into bonus-paying accounts.

But that's fine, isn't it?

Not really. The reason why banks/building societies offer them is because they know many people will forget to switch into another account when the bonus ends. The interest paid then, of course, falls to less than useless.

Thanks for the warning. But why is this news?

Because finance firms are abandoning the bonuses. Research from Moneyfacts shows that the number of easy access accounts with bonuses has fallen by two-thirds in two years, leaving just 32 of 378 accounts including a bonus. That's good news for those trying to compare different deals.