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Banking on complexity - 080207
They’re at it again. The banks I mean. Trying to fool us into putting our hard-earned savings into accounts that seem to head the ‘best buy’ tables
This time it is HSBC. A new Online Saver account launched on Monday offers 5.75% AER on every pound you save. Until you want to take some of your own money out. Then it fines you a month’s interest for each withdrawal.
Suppose you put in £10,000. Over the year your money will earn £575 interest. Its nearest rival will pay you only £570. So by choosing HSBC you will get an extra £5 annual interest. But if you decide to take out that £575 HSBC will cancel a month’s interest. So that single withdrawal will cost you a fine of about £47. A lot more than the extra £5 from the fractionally higher interest HSBC pays!
The only way to avoid this charge is to say in advance that you want the interest paid monthly into another account. Though the bank does not tell you that unless you ask.
If you take out money once a year that penalty will reduce the amount your money earns to about £528 a year – which is equivalent to an interest rate of less than 5.3%. Not a best buy. Not even in the top 20.
And there are other restrictions. The maximum you can put in is £50,000. But none of that can come from another HSBC bank account! And when you want to take money out there may be restrictions on how much you can transfer at one time into a non-HSBC account.
So if you have cash to save, go for an account that offers the same interest on your money however much you put in; that doesn’t fine you if you take your own money out; doesn’t offer a bonus for the first few months; and preferably has a guarantee on the interest rate it will pay. And when the guarantee is over, check again and move your money it if necessary.
Current top of the instant access, no strings, no penalties, no temporary bonus, best buy tables is Icesave from Landsbanki which pays 5.7% AER (on £250 to £1 million) and guarantees that its rate will be at least 0.25% above the Bank of England Base Rate until October 1 2009 and at least match it for two years after that. But keep checking. Something better might come along.
This article was created: 8 February 2007.
This article was last edited: 15 February 2007.
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