Do you know what interest rate your savings account is paying?
If you haven’t checked lately, it’s probably as little as 0.1 per cent. If you think that’s just the symptom of the low-interest rate cycle we’ve been living through for the past five years or so, think again. It’s a deliberate policy by our financial institutions.
And, let’s be honest, 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 has finished.
In March, Royal Bank of Scotland and NatWest scrapped teaser rates and bonuses on savings accounts, and Nationwide and HSBC made similar moves. However, there still remain many savers stuck in rubbish accounts that pay practically nothing. Moneyfacts, the data firm, says there are 1,287 different accounts and 87 pay 0.1 per cent or less. Barclays is the latest to clean them up and said this week that it is scrapping 20 old accounts.
That’s good news as it reduces confusion. However, the 480,000 savers are all being moved into the bank’s Everyday Saver account, which means they’ll get 0.31 per cent on their cash. That includes a 12-month bonus and, once this is removed, the account will pay just 0.1 per cent. So the bank is up to its old trick 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.
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