🔔 Ask Anna: Why is a provider offering a better rate of interest on its easy access account than its notice account?

Author: Anna Bowes
05th October 2018

Q - I just saw on your website that Charter Savings Bank is paying more interest (1.40%) on its easy access account than on its 30-day notice account (1.36%). Are you sure this is correct? If true, do you know why some banks have such bizarre interest rate policies?

Bank Building

First, I can assure you that the information is correct, but we are always grateful if you can let us know if you spot something that might not be quite right!

It is unusual for a provider to pay a lower rate of interest on their notice account compared to their easy access account – however there may be a number of reasons why this is the case at the moment.

One of the key reasons is likely to be the fierce competition for easy access funds.

According to Bank of England statistics, of all the money held in savings accounts, at the moment over 80% is in easy access and providers are battling to attract this money. This is good news for savers as it is pushing the best buy rates in the right direction.

At the same time, the shorter-term notice accounts seem to be less popular and therefore there is less competition. This is illustrated by just how long the Charter 30-day notice account has been available. It was launched at the end of May this year, so over four months ago. At the time it was launched, the easy access account that Charter Savings Bank had on-sale was paying just 0.50% - considerably lower that the notice option.

The current easy access account paying 1.40% was launched on 27th September – the same day as the new Marcus Online Savings Account paying 1.50%. So, it’s likely that Charter Savings Bank responded to the anticipated introduction of that new account, by launching something competitive, in order to increase the amount that it was attracting.

It is unlikely to be available for as long as the notice account, as more people are placing funds in easy access accounts anyway and, quite frankly, why would you open a notice account paying a lower rate than the easy access account available at the same time.

There are some more competitive 120 day and 180 day notice accounts available that are paying up to 1.85% at the moment, so savers are likely to either choose easy access or accounts with a longer notice period.

In summary, it’s unusual but it can happen as, certainly with the best buy accounts, the level of competition between providers in each area of the market governs the best rates available and that competition is driven by both appetite from savers and the providers’ individual funding requirements.

I hope this makes sense and explains why this anomaly may have occurred.

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