Soft soap for savers

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The Independent Online
The flipside of the latest round of mortgage rate cuts - the new norm is 6.99 per cent - is cuts in interest for savers. As ever, don't expect the building societies and banks to make as much noise about this as the good news for borrowers. The cuts will come, however, probably sneaked in over the next few weeks.

Which makes last week's announcement by the Woolwich particularly welcome: that savers can touch their money without reducing their windfalls (see article opposite). Savers with societies that have announced windfalls have been loath to touch their money for fear of losing or reducing their bounty. That in turn has reduced the pressure on societies to offer competitive rates.

The Halifax and now the Woolwich both say they will give savers advance warning of when they need to top up their accounts to maximise their windfalls. So savers do not have to feel locked in if in the meantime they want to spend their money or get a better return elsewhere.

Finding that better return is the difficulty, of course. Moves such as these by the Halifax and Woolwich may help to dilute the tide of rate cuts. But the fact remains that savers were being stuffed before, and by and large that is likely to continue, notwithstanding seemingly competitive moves by non-traditional players such as Tesco (see below). In the meantime maybe, just maybe, other societies such as Alliance & Leicester will be shamed into following the Woolwich. At the moment A&L savers do not know whether they will reduce their windfall if they touch their money.

Play your cards right

THERE is no doubting the popularity of supermarket loyalty cards - more than 8 million people already hold Tesco's existing discount-earning Clubcard, 6.5 million of whom are regular users. So I would expect the supermarket's new interest-bearing Clubcard Plus (see back page) to prove a hit too.

The combination of 5 per cent credit interest, shopping discounts, and a 9.3 per cent overdraft rate may well seem alluring. Nevertheless I'm yet to be convinced many people will benefit to any significant degree from the upgraded cards.

Many will look to fund the card with little more than what they might spend on their shopping. For them the cycle of spending and topping up is unlikely to generate much interest, whatever the rate.

Overdrafts will be limited to the size of your monthly standing order. So serious borrowers are unlikely to benefit much from that favourable rate either.

Furthermore, people who pride themselves on staying out of the red may well be riled that they accidentally slip into overdraft with the card, simply because they happen to underestimate their likely spend when they set up their funding payments. Tesco till operators will not warn you if a bill is about to send you into debt.

Also worth bearing in mind is that free cash withdrawals are already available at Tesco cashtills for those paying by existing bank debit s

In fact the canniest shoppers might prefer to continue paying by credit card, so delaying payment while maximising interest on either Tesco's or another account, and still picking up loyalty points.