Simon Read: Savers - beware rip-off rates
Saturday 18 September 2010
How many savers have cash in low-paying accounts? I suspect it's millions. Banks and building societies have become notorious for slyly cutting rates on once high-paying accounts, leaving loyal customers getting paltry returns.
The latest victim is Independent reader Don Creasey of Maidstone, Kent. He's had an ISA saver account with the once-mighty Halifax for the past 10 years, and has been happy with the returns he's been getting. Indeed, last time he visited a branch to update his savings book in September last year, the interest paid over the previous five years averaged out at around 3.2 per cent. Not the best available rate, but perfectly satisfactory.
This month Don is moving house, so popped to his local branch to close the account because he needed the cash in it. He got a big shock. "The interest I was paid for the past year worked out at around 0.15 per cent," he told me. Even in today's low-rate environment, that's a massive drop in returns to an almost insulting rate. In fact, Don's interest was cut from £200 a year to just £8.
The average amount paid out right now on deposit accounts is just 0.77 per cent, according to the rates analysts Moneyfacts. And Don, along with millions of other ordinary savers like him, could be forgiven for believing that a popular account offered by a major high-street institution would at least offer an average return on cash.
For the Halifax to cut the rate to less than a fifth of average returns is staggeringly poor. When Don queried the pathetic returns he was told that book-based accounts always attract a lower rate of interest and that customers were warned in advance of this.
Don's response? "I never received any warning of such a drastic change in rates and was not warned of this when I visited the branch in September 2009."
I believe that Don didn't see any such warning from the Halifax. The bank – partly owned by all of us – could probably produce evidence to show that it did inform Don of the slashing of rates, but no doubt in the smallest of print at the end of the most tedious letter.
Don feels let down by the Halifax, and he has every right to be. He wants me to warn readers of Halifax's shabby actions as others could be losing out far more than he has.
I'm happy to pass on his warning, but not just to Halifax customers. Anyone with savings in any bank or building society should check the rate they're getting now.
Two years ago, before the Government partly nationalised many high-street banks in October 2008, the average savings rate was 3.6 per cent. Rates fell to their current paltry level in March 2009, and have hovered around the 0.75 per cent mark ever since.
There are better deals around, but they only seem to be available to new customers, while the rates on existing accounts are quietly reduced to practically nothing. It's the most shabby of service from banks and building societies, but they only get away with it because of savers' lethargy. Check now what rate you're getting on your account and if it's less than 2 per cent, it's time to switch to a better deal.
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