Bank’s hor­ror is over­stated

Auckland City Harbour News - - NEWS -

‘‘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.

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