RBS/NatWest and Nationwide scrap teaser rates
Both the embattled banking group and rapidly-growing building society have decided to scrap introductory offers on some products.
The Royal Bank of Scotland (RBS) group has launched a new manifesto pledging to be ‘simpler, smaller and smarter’ for its customers after it reported an £8.2 billion loss for 2013.
It’s the classic 'back to basics' approach following questions around bonuses and why the bank – 80% of which is owned by the taxpayer – has performed so badly.
But the new direction RBS is taking, which also applies to its NatWest and Ulster Bank brands, has caused a bit of a stir, as amid a raft of promises it has pledged to ban all teaser rates. But it's not alone in that pledge.
A new direction
RBS says it wants to be the number one banking group for customer service, as well as the most trusted banking group in the UK, by 2020.
To do this it is pledging to:
- offer the same deals to customers who bank in branch and online;
- put hundreds of business bankers back on the high street;
- explain charges better;
- simplify products by halving the number on offer;
- speed up small business lending decision from five weeks to five days;
- open personal current accounts for new customers by the next day;
- and, significantly, offer the same deals to all customers by banning teaser rates.
These promises have fuzzy deadlines but RBS has said it is already offering the same rates to customers, however they choose to bank across its brands, and it will ban all teaser rates by mid-March.
The latter promise will apply to things like savings products that have temporary bonuses as well as 0% balance transfer credit cards, which allow you to move debt built-up on other cards onto a 0% deal for an introductory period.
The move will mean cards like the NatWest Platinum MasterCard and Royal Bank of Scotland Platinum MasterCard, which currently offer 28 months 0% on balance transfers (with a 2.99% fee) as well as six months interest free on purchases, will disappear.
However, the balance transfer market won’t suffer too much with the departure of the NatWest and RBS cards. While these cards feature in the top 10 of the best buy table there are plenty available which offer lengthier deals.
There’s a Barclaycard Platinum Visa for example that comes with 31 months 0% on balance transfers with a 2.99% fee, as well as six months interest-free on purchases. For more on the top cards read The best 0% balance transfer credit cards.
Meanwhile all three brands – NatWest, RBS and Ulster Bank – will remove introductory bonus rates on savings accounts.
These changes are already in motion, though they aren't exactly offering anyone a better deal. The RBS Instant Saver, for example, is offering just 0.5% AER interest. For better deals check out The best instant-access savings rates.
Nationwide scraps bonuses
RBS isn’t alone in scrapping teaser rates. Nationwide has also been working to simplify its savings range and has now removed all introductory bonuses from savings accounts
Earlier this week, Nationwide announced it would scrap the bonus on new issues of its Flexclusive and Easy Saver ISA.
Previously the Nationwide Flexclusive ISA came with a rate of 1.75%, which included a 0.75% fixed bonus until 31st January 2015. So the underlying rate was just 1%. Meanwhile, the Nationwide Easy Saver ISA had a rate of 1.60% that came with a bigger bonus of 1.10% also temporarily inflating it until 31st January 2015. Here the underlying rate was just 0.5%!
However, to its credit, Nationwide has relaunched the accounts minus the bonuses but with the same interest rates.
The Nationwide Flexclusive ISA now comes with a rate of 1.75% while the Nationwide Easy Saver ISA comes with a rate of 1.6%.
Currently the Nationwide Flexclusive ISA is the top paying instant access ISA on the market, but it's only available to FlexAccount, FlexDirect and FlexPlus current account customers.
The Easy Saver Isa is open to anyone and is also available via Nationwide’s other building society brands: Cheshire, Derbyshire and Dunfermline.
Nationwide says these new accounts offer an enduring long-term rate that provides good value for its members.
The row over teaser rates
Back in September last year financial regulator the Financial Conduct Authority (FCA) announced it would investigate ‘teaser rates’ in the savings market.
A teaser rate when it comes to savings is where an account offers a bonus interest rate on top of an underlying rate – for a temporary period.
These artificially inflated returns tend to last just 12 months before the bonus disappears and the rate plummets.
Some argue that bonus teaser rates trap innocent savers into believing they are earning a great rate when the reality is this is only temporary and the accounts become ‘zombie accounts’ where money is left earning a pittance.
But these caveats aren’t hidden from customers and the FCA will also be looking into how apathetic we are when it comes to switching savings accounts.
That said, many believe the result of the investigation could be that teaser rates on savings accounts are banned completely. Cynically, one could say that both RBS and Nationwide are doing now what they might be forced to do later.
We'll find out when the FCA delivers its verdict later this year.
More on credit cards and savings:
The best 0% balance transfer credit cards
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