Don’t let banks and building societies fob you off with substandard rates on your savings.
You would think that now is a decent time to be a saver. We have had a succession of increases to Bank Base Rate, to its current level of 4%, and the money markets expect at least one more increase to take place this year.
As a result, the average rates offered on new savings deals have improved to much more respectable levels after years of pretty paltry returns.
The trouble is that just because Bank Base Rate is going up, it doesn’t necessarily mean that the rate on your existing savings account will do the same.
That’s because of some of the questionable and downright sneaky tactics employed by savings providers.
Rate rise? What rate rise?
These tricks have been highlighted by Money Mail and Savings Champion, with Sainsbury’s Bank employing a particularly questionable approach.
You might expect that the interest rate paid on its variable rate cash ISA would increase in line with Bank Base Rate, and it does. Sort of.
Because in order to see the rate rise, you have to actively ask the bank for it, whether over the phone or through its online chat service.
If you fail to do so, you’ll continue to languish on the previous rate ‒ there will be some savers who are still getting 0.7% for example, rather than the current rate of 2.85%.
This is actually outlined in the terms and conditions for the account, incredibly.
What’s your issue?
Another trick employed by some savings providers is to simply keep releasing new versions of the same account, with a new ‘issue’ number.
So they might have easy access account issue 1, 2, 3, etc.
The bank releases a new issue when they want to attract savers, with an eye-catching rate.
But then they don’t change that rate when anything happens with Bank Base Rate, instead opting to launch a new deal.
I might have an account that paid a decent rate a year ago, but rather than increase that rate, the bank could instead have chosen to launch a handful of ‘new’ versions instead, leaving me languishing with an outdated return.
Analysis by Savings Champion picked out Virgin Money as a provider who is guilty of this, noting that it has 343 savings accounts where the rate has not changed in at least a year.
It's quite remarkable that any bank should feel the need to offer more than 300 different savings accounts at any one time.
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LoveMONEY comment: fight back against sneaky banks
The idea that an interest rate on a savings account can only be increased if you explicitly ask is absolutely ridiculous, but there are plenty of other ways banks and building societies attempt to dodge passing on interest rate increases to savers.
The terms and conditions for these accounts are lengthy, and for good reason ‒ these firms have worked out how to get away with leaving savers disappointed with mediocre rates, knowing that the small print protects them.
While there’s not much we can do about such small print sneakiness, savers do hold the power here. Ultimately banks and building societies want our business, which is why the best rates are reserved for new customers.
So if we want to enjoy those higher rates, and see the greatest possible growth in our savings pots, then we need to use that to our advantage and regularly shop around for a new home for our cash.
It would be lovely if we could rely on savings accounts to move with the times, to find a decent account and simply plonk our savings in there on a regular basis, safe in the knowledge that we would always get a respectable return.
But just as with other areas of personal finance, the real rewards are limited to those willing to do the donkey work and move providers every year or so.
When the rates offered on savings deals were really in the doldrums, it could feel difficult to justify the time and effort involved in doing that, but as rates have increased from those record lows, it no longer feels like a lot of work for little reward.
Moving our money around also has the impact of demonstrating to banks and building societies that they cannot take our custom for granted.
It’s only by firing these warning shots that we can hope that they will amend their practices, since evidently, this isn’t something the financial regulators fancy touching.