Moneyfacts.co.uk - weekly personal finance update 27.06.07
Moneyfacts.co.uk team comments on:
- The Supermarket savings war – 1- 0 to Sainsbury’s
- Internet accounts with a catch
- BoS and Halifax credit cards take a turn for the worse
- New 8% Abbey current account
- Simplification of credit card charging please
Savings
Rachel Thrussell, Head of Savings at Moneyfacts.co.uk – the money search engine, comments:
The Supermarket savings war 1- 0 to Sainsbury’s
“Last week saw the savings market taken by storm with the rate increase on the market leading no strings savings account from Sainsbury’s Bank now paying 6% gross/AER. This was shortly followed by Tesco’s upping its game. The existing Tesco Savings account now offers a six-month introductory bonus of 1%.
“Tesco’s headline rate is now a heady 6.50%, but must be taken with a pinch of salt. Unlike the Sainsbury’s account, it includes the 1% six-month bonus (for accounts opened until 14 August). On top of this the rate only reaches 6.50% gross on deposits over £50K and can dip as low as 5.35% gross on deposits of £1 - £2,999.
“It’s great news to see the supermarkets competing with the traditional banks and building societies. But as with all accounts you must look beyond the headline rate. If it looks too good to be true then there is probably a catch. One nil to Sainsbury’s.”
Internet accounts with a catch
“Birmingham Midshires online saver account launched this week pays a respectable 5.89% gross, but there is a catch – if you withdraw any money from this account you lose interest on your entire balance for that month. Also this week Bradford & Bingley has launched issue 4 of its eSavings account. While the rate has increased to 6.01% gross/AER, it does include a 12-month bonus of 0.51%.
“Providers are still competing on rates, but consumers must see through this somewhat overused tactic. An instant access account doesn’t always do what it says on the tin.
“With mortgage and lending margins low, rising bad debts and high competition in the savings market, providers can’t often really afford to pay the headline rates they offer, not at least without putting some form of catch in place.”
Credit Cards & Loans
Michelle Slade, Personal Finance Analyst at Moneyfacts.co.uk – the money search engine, comments:
BoS and Halifax credit cards take a turn for the worse
“These market leading ‘12 month’ One cards from Halifax and Bank of Scotland were launched earlier this year, offering an impressive 12 months 0% on purchases. But this week sees these deals become far less attractive.
“The BoS and Halifax One MasterCards and the BT One card from Halifax have increased cash rates by 1%, to 23.95%. But the biggest downside is the reduction in the 0% deals available, falling from 12 months to six.
“Keeping rate tarts satisfied with 0% deals cannot be profitable in the long term, considering the administration costs, bad debt provisions and lack of interest income. But while some card providers continue to offer such deals, why not take full advantage? It’s not often that you will get something for nothing from your bank.”
New Abbey account raises the bar (but only in the short term)
“The launch of Abbey’s 8% current account takes the battle to another level. But you need to be aware that this 8% is short lived, after a year this will fall to 2.50% and it’s sadly not available to existing Abbey customers.
“For anyone looking for a longer term relationship, the Halifax 6% account will offer better returns over several years. It’s not always best to choose the highest rate: often a decent rate that is here to stay works out better.
If you’re someone who keeps a very large credit balance on your savings account, don’t forget the ‘First account’ from Coventry BS which pays 5.94% gross (in the first year) on the first £250,000, rather than the standard £2,500 limit that accompanies most ‘in credit’ current account offers.
“It’s good to see that the banks are upping their game to win your current account business. It’s about time they stopped offering 0.10% credit interest, and charging you up to 20% to borrow on an overdraft. After all current accounts are big business and a platform from which to sell those potentially lucrative pensions, insurance and mortgage products.
“With so many good deals now on the market, don’t let your bank get away with offering you a poor product, especially if there is financial return for switching, either by means of a great rate or financial incentive. You would be a fool not to switch.”
Simpler cards is a must
“It’s heartening to see that the OFT is taking note of the Which? super complaint. Credit cards have become too complex, even for some within the industry, so what chance does the man on the street have?
“Credit cards have so many components which can make a deal competitive or not, so some simplification in this market is long overdue.
”Moneyfacts.co.uk, is in full support of the investigation. It’s about time consumers can get a fair and simple answer as to whether they are getting a good deal. Surely that’s not too much to ask?”
Moneyfacts Group
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