Don’t fall for ‘bonus’ accounts
SAVERS should seriously consider ignoring accounts with a temptingly high initial rate that plummets down the line.
Instead, choose a deal that will continue paying you the competitive rate you signed up for. Banks and building societies have launched a string of easy-access accounts that come with an initial ‘bonus’.
These so- called bonus accounts typically pay high rates for the first year or so before your return drops sharply to as little as 0.2 pc. This means that unless you switch to a new deal straight away, you will end up earning a pittance.
But there is little difference between top accounts with or without a bonus.
The best rate, including the extra interest for a year, is 1.5 pc against 1.45 pc without. The 0.05 gap gives just 50p more interest on each £1,000 saved.
Marketing departments use bonuses to propel accounts up the best-buy tables and lure in savers. They then rely on significant numbers of savers staying where they are when the bonus vanishes. They hope you either won’t notice, forget or be too busy to switch to a better deal so they can then get away with paying you next to nothing.
James Blower, savings expert and founder of website Savings Guru, says: ‘I am not a fan of bonus accounts. You don’t need to use them, as you can do just as well elsewhere.’
Under rules laid down by city regulator the Financial Conduct Authority ( FCA), your bank or building society must write and tell you when your bonus runs out if you have more that £100 in your account. You should get a notification within 14 days of the change.
Even so, just six out of 100 savers have switched their easy-access account in the past three years, according to the latest research. And six out of ten customers stick with the same provider for at least ten years.
Paragon Limited Edition Easy Access online account, launched last Friday, pays 1.45 pc, while the new Beehive Online Saver pays 1.4 pc. Both are bonus-free.
Similar rates are on offer through the Tesco Bank Internet Saver at 1.45 pc and Skipton Online Bonus Saver at 1.42 pc.
But these two come with a bonus, which leaves you much worse off after a year or so.
The Tesco rate drops by nearly two-thirds to 0.55 pc after a year. With Skipton you’ll see 1 pc, or a third less, after 16 months.
Some crash even further. AA Savings Easy Access’s 1.36 pc nosedives to 0.2 pc and the initial 1.3 pc with Post Office Online Saver plummets to 0.25 pc.
The only bonus account worth a second look is Marcus by Goldman Sachs at 1.5 pc.
The small 0.15-point bonus means you are still left with 1.35 pc once the 12-month bonus disappears.
Money Mail does not include accounts that come with a bonus in its best-buy tables.