Do you know what interest rate your savings account is paying? If you haven’t checked lately it’s likely it’s as little as 0.1 per cent.
If you think that’s just the symptom of the low-interest rate period we’ve been living through in the past five years or so, think again. It’s a deliberate policy by our financial institutions and has been for some time.
And, let’s face it, it stinks. The way it works is this. Bank or building society launches new market-leading account, attracts thousands of savers and then hits them with rate reductions.
One of the most common tricks is to have a 12-month introductory bonus rate. That can push an account to the top of the best buy tables, but can leave it paying practically nothing when the bonus period is over.
Such underhand tactics looked to be heading for history when the City watchdog last year launched a market study into the effects of “teaser rates”, with rumours flying that it may ban the practice.
In March, the Royal Bank of Scotland and NatWest scrapped teaser rates and bonuses on savings accounts. Nationwide and HSBC have made similar moves.
But there still remain many savers unknowingly stuck on rubbish accounts that pay practically nothing. Moneyfacts says there are 1,287 different accounts and 87 pay 0.1 per cent or less. But banks are starting to clean them up. Barclays is the latest and reported this week that it is scrapping 20 old accounts.
That’s good news as it reduces confusion. But the 480,000 savers affected may end up in a worse position. That’s because they’re all being moved into the bank’s Everyday Savings account, which means they’ll get 0.31 per cent on their cash.
But of course that includes a 12-month bonus and, once that’s removed, the account will pay just 0.1 per cent. So the bank is up to its old tricks of misleading people into thinking the rate is OK, when it’s actually rubbish. Anyone affected should look to switch to a rival where the rate they’re offered is the rate they’ll get.Reuse content