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This is where we keep our short term savings - and, if we can't
tolerate risk, our long term savings too.
Banks charge more interest on say overdrafts or mortgages than
they will pay you on your deposit account. This gap between the
interest rates boosts their profits. If they can increase the gap,
most of them will.
Time after time we read of cases where a new account product is
launched offering a good rate of interest which gets quietly downgraded
when the next headline product comes along. See below - obsolete
accounts.
What we the consumers need is proper regulation which forces providers
to link rates on their deposit accounts to Bank of England Rate
by a fixed margin. Then we will be able to put our money in the
account and sleep easy. Providers don't want this, because they
make money by manipulating the interest rates on their accounts,
though they are now obliged to tell you of changes in interest rates.
Until we get the regulation we deserve, what can we do?
First, don't get too anxious. Start with this sum. If your interest
rate was 1% or 2% a year higher, how much more interest would you
get each year - after tax? If the answer is say £20, is it
worth losing sleep over?
If you're still with me, probably you need to check your interest
rate every two or three months or so. If you don't know what it
is at the moment, telephone and ask. Then look in the weekend broadsheet
papers to see how your account compares.
I think this is easier than looking at rates on a screen - when
you see the rates in the paper, you can more easily think about
them, and decide whether you need money with no notice, or whether
you can accept one month's notice of withdrawal, for instance. And
the small print's easier to read!
As a rule of thumb, the interest rate you get from the high street
branch of a bank or building society is usually among the lowest.
(And Natwest
for one don't always recommend their best accounts.) If you
want the convenience of a local branch, this is how you pay for
it. If a postal account will do you instead - and they usually seem
pretty efficient - consider switching from a branch based account.
Possibly the best rate of interest will be on an Internet account.
Look at their site. Will you remember the passwords you need? If
it's a joint account, can both of you work the screens?!
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