Bank’s horror is overstated
‘‘We’re horrified’’ began the newspaper advert from RaboDirect, the retail banking arm of rural bank Rabobank. That got my attention. When a bank claims to be horrified, I want to know why.
I have long thought that banks, which have a finger in every pie in the land, must have seen pretty much everything.
Mustering a sense of surprise, let alone horror, seems unlikely for such an entity, but it was, in fact, worse.
Reading on, I found Rabobank expanding on its feelings. It was ‘‘really horrified’’.
OK, suspense over, it was launching a new regular savings account and was drawing attention to the very poor rates of interest some banks pay on some of their so-called savings accounts compared to its new PremiumSaver (4.25 per cent interest providing the balance increased by $50 each month. If not, the interest rate falls to 1 per cent for that month).
Rabo has always paid savers pretty well, and has done its part in taking a bit of competition to the local big banks.
But is there substance to its claims that many bank savings accounts were often ‘‘ complicated and confusing’’ riddled with ‘‘tricky fees and language only the banks can understand’’ and that these accounts were ‘‘holding Kiwis back from saving as much as they could be’’?
I’m sorry to say, I think the answer is: ‘‘Yes . . . sort of.’’ My ‘‘Yes’’ is because unwary savers on some big bank savings accounts can end up being paid interest on savings as low as 0.1 per cent which is frightful, and because RaboDirect boss Mel Templeton may have a point when she told me that some accounts’ interest rates are so poor they should be prevented by law from being able to be called savings accounts.
In the low interest rate world we now occupy many of the big bank savings accounts offer paltry enough interest in the 1 per cent to 2.5 per cent range, so it’s hard to say where that legal limit might be set.
Also, some of the bonus saverstyle accounts pay terrible interest if savers fail to make a deposit of a certain size ($1-$20 a month seems to be the range which are pretty unambitious rates of saving).
They also pay poor interest if people make a withdrawal, regardless of whether later in the month they make a large deposit.
That does seem rather tricky, and I welcome RaboDirect pointing the finger at the likes of Kiwibank, Westpac, and ANZ for that one.
The ‘‘sort of’’ part of my answer reflects the fact that, actually, the big banks do a good job of communicating the features of their savings accounts.