It’s a good idea to have some cash in a savings account, where you can call on in an emergency. It’s an even better idea to ensure that your money is working for you and earning the best rate of interest that you can find.
But although shopping around for the best rates is important, you need to look at them carefully. Some of them are just a tease – and you may not earn as much as you bargained for.
What is a teaser rate?
Banks and building societies sometimes use ‘teaser’ rates to help them get their accounts to the top of the best buy tables.
They are simply an inflated rate of interest that looks rewarding, but which will be withdrawn after a few months or a year, to be replaced by something far less attractive. To be fair, the bank or building society will have made clear that your rate was temporary or included an introductory bonus when you signed up. But they will hope that you don’t notice that the return on your money has got smaller, or perhaps that you have simply got used to the idea of leaving your money with them.
It’s a marketing trick that may have fallen out of fashion in recent years. Several large providers stopped offering this type of introductory bonus rate after a crackdown by the Financial Conduct Authority in 2015.
But there was another reason, apart from the fact that savers were annoyed by the treatment. The banks were awash with cash, thanks to the government Funding for Lending and Term Funding schemes. They didn’t need to compete so hard for your savings.
With both schemes closing this year, banks have once again started to bring in savers in using teaser bonus rates. In fact, four of the top six easy access accounts now use ‘teaser’ rates.
What should you do?
The simple fact is that most of us don’t switch financial products very often. This means that many of us are getting poor returns on our savings, and would be better off with a savings account that pays the same rate to new and existing savers.
But it does not have to be that way.
Simply keep an eye on the best rates available, make sure your savings are with the highest paying account, and on the day that your introductory teaser expires, or your bonus is paid, move your cash on.
Banks are obliged to remind you in advance that your rate is due to fall, so you can start looking around, and plan ahead.
If you’ve got money languishing in an old account, it’s important to check the rate it is paying you now. Switching is free, and it could help your money grow a little faster. Admittedly, switching accounts for the best rates is unlikely to help you become a millionaire. But it is good to beat the banks and building societies at their own game.
You can see top rates on savings with the Continuum rate finder, or call us to discuss your savings plans.
The value of investments can fall as well as rise and you may get back less than you invested.
yourmoney.com – Warning for savers: ‘teaser’ rates are back – 27th June 2018