The Perfect Savings Account by Finance News Bulletin
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Published: 03/09/07
Since 1998 my savings have wended their method through accounts from Cheltenham & Gloucester, Egg, Intelligent Finance, ING, Icesave and Sainsbury's So, on average, I've only reserved my money in an account for about two years before its rate has slipped to such a degree that I've decided it's valuable going elsewhereOf course, moving your cash like this can be a hassle First of all you have to find a novel account and then go through all the money laundering hoops to unlock it
Finally, you have to transfer your money, during which time you'll misplace a few days' interestHopefully, this last difficulty will be reduced when the banks eventually get round to speeding up transfer payments The present 3-day process was due to be replaced by November of this day but it was recently announced that the timetable had slipped a further six monthsWhile this obviously goes without proverb, I'm always amazed at how many accounts disburse less than the base speed
The top accounts at the moment are paying 63% AER But a search for variable rate financial records without bonus rates revealed that from a option of over 400 accounts, only 10% of them pay better than the base rate (currently 575%)
Furthermore, semi of them pay less than 39% After basic rate tax, this means you're losing cash in real terms as your rate of interest is less than price rises Indeed, the account I had with Cheltenham & Gloucester all those years before now offers a whisker over 4%, demonstrating just how distant once competitive accounts can fall by the wayside
Normally, I similar to the word ‘bonus' But not when it's in close proximity to the phrase ‘savings explanation' extra rates are typically 05% or 0
75% and last for up to six months Once they are taken out the equation, they turn a high-quality account into a mediocre one luckily, I've found that it's very rare for an account with a bonus rate to offer a significantly improved rate than the best non-bonus accountsI'm happy to open a novel account every once in a while, but every six months is a bit too frequent
Still, it will be interesting to see what impact the novel transfer payment system has on the curse of the bonus rate When it becomes easier to move money around without losing interest, it might become less profitable for banks to present these incentives and rely on our apathyTiered tax tick me off only slightly less than bonus rates An explanation that combines the two is really taking the Michael
There is no real cause why tiered rates require to be applied to any account Again, luckily, it's rare for an account with this feature to be among the top payersFor a few years now, easy access accounts have ruled the roost and become aware of accounts have been a dying breed But lately, we've seen a few accounts that offer high-quality rates but contain the following depth charge in the little print -- no interest is paid in any month a withdrawal is made
Yuk For a high-paying account this translates into a defeat of around 05% in interest for each month in which you make a withdrawal So, even one withdrawal makes the interest rate unappealing
There has been one good trend in investments accounts recently and that is improving interest rate guarantees Not long before, most guarantees would last for just twelve months, and were rarely found among the top accountsThese days, some banks are prepared to make promises that last until 2011 Indeed, most of the top financial records are actually offering a better rate than their guaranteed minimum
How long this degree of difference will last remains to be seen© patent 1998-2007, The Motley Fool Limited All rights reserved This material is for individual use only
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