Banks and building societies have become increasingly sophisticated over the years, introducing a range of ploys that make their accounts appear more competitive and elevate them to the top of the Best Buy Tables. For the canny saver, these features can be a great way of squeezing out as much interest as possible, but for others it can be an expensive trap. Below are some of the potential ‘tricks’ to look out for.
Having disappeared for a while, a number of the current best buy accounts are once again including what is known as an introductory bonus and so it’s important to understand just what this means. A more straightforward description would be that the account pays an enhanced rate of interest for a specific period of time, such as twelve months.
When your account includes a bonus, it’s essential to make a note of when it is due to end, so that you can find another competitive account to switch to at that time. Remember, banks and building societies are counting on you to not move your funds and remain on the lower rate for as long as possible. You can call their bluff by doing the opposite.
And look out for accounts that revert to a different, lesser paying account, at the end of a set period – whilst they don’t state that the headline rate includes a bonus, these are still bonus accounts, just in disguise.
Our free Rate Tracker Service is a great way to keep an eye on the rate you are receiving, sign up today and we can remind you that the bonus is coming to an end and also let you know the best rates available at that time, to switch to.
So, whilst on the face of it bonuses can be seen as a negative, enticing savers in and then paying a lower rate after an initial introduction period, if savers are on the ball, they can use them to their advantage and get a better return on their funds.
Another strategy is to offer an Easy Access account that will penalise you if you try to access your money too often. For example, the provider may offer a very competitive interest rate, but the account allows only a limited number of withdrawals over 12 months. If more withdrawals than stipulated are made, the rate will often drop dramatically, usually to an uncompetitive level. Lower rates tend to then apply for the rest of the year before the number of withdrawals are ‘reset’. And with some accounts, you get the lower rate or even no interest in any month that a withdrawal is made.
While it is more common to impose a temporary lower rate period when excess withdrawals are made, in some cases the account will be closed or no further access to the money granted, so it is very important to check the terms and conditions of the individual accounts.
These accounts are, therefore, only appropriate for those who don’t need access to their funds very frequently. They can be a good way to get a higher return as long as you are clear on the terms and conditions and are able to plan withdrawals carefully.
Lower rates on lower amounts
This may sound obvious, but some accounts pay higher interest rates the more you have in the account, which is great for those with larger amounts to invest. However, the reverse is also true, so making a withdrawal can lower the rate paid on your funds. Again, it is a case of being aware of the terms and conditions of the accounts, being clear where the interest rate thresholds are and planning withdrawals around this.
Lower rates on higher amounts
Occasionally the rate of interest on an account will actually fall if the cash invested is higher than a certain amount, so again it’s important to be vigilant when opening an account. Check the rate that you will earn on the amount you invest and that you can add to it without detrimentally affecting the interest rate.
Our Rate Tracker Service will keep you informed about the interest rate applicable on your account, so you can react accordingly. If by adjusting your balance, your rate falls, Rate Tracker will let you know. There may be alternative places to take your funds from to maintain your higher rate and your Rate Tracker Portfolio will allow you to look at this at a glance.
Some accounts may involve a combination of all these tricks, but by being aware of the terms and conditions of these account you can turn these tricks into treats and boost your savings balance.
Read our ‘Facts’ under each of the accounts featured on our Best Buy Tables and the terms and conditions of each account carefully before proceeding to ensure you are aware of how this account works. If you are unsure of any aspect of an account, give us a call on 0800 011 9705 and one of our savings experts will be happy to help.