BANKS and building societies are finally realising that consumers, wary of chasing rates and being caught out by hidden catches, are beginning to prize simplicity above all else. Expect to see a flurry of new accounts that are either “hassle-free” or claim to have “no strings attached”.
Cahoot, the online arm of Abbey, is the first to launch such an account. Its easy- access savings account pays an annual equivalent rate of 4.85 per cent. The minimum deposit is £1 and the maximum is £250,000.
The account is a challenge to ING Direct’s savings account, which brought the open, honest and simple concept to the UK in 2003. When ING reduced its rate to 4.5 per cent on January 1, it left the door open for competition.
Sue Hannums, of AWD Chase de Vere, the independent financial adviser, says: “I would not be surprised if cahoot was the first of many companies to offer simpler savings accounts this year. ING proved how popular such an account can be and has shown to others that there is more money to be made in this market.”
The highest-paying no-strings account is currently the NewcastleNet Savings (Issue 4) account from Newcastle Building Society, which pays 4.9 per cent. Egg, Intelligent Finance, National Counties Building Society and Direct Line also offer rates above 4 per cent.
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With no-strings accounts, interest rates can still come down, as ING Direct proved. However, they are unlikely to drop as frequently or by as much as the rates on accounts with introductory bonuses. These accounts pay a high rate initially to lure customers but reduce the rate a few months later. For this reason, accounts with an introductory bonus are listed separately on our best-buys table on page 19.
Andrew Morland, 26, is one of the many customers now calling for all accounts to be made more simple. Recently he was assured by NatWest’s call centre that he would be allowed to withdraw money from its cash mini-Isa at any branch. However, when he requested a £4,000 bank draft at his branch, he was told that he had to give 24 hours’ notice. It was not until he threatened to close all his NatWest accounts that the branch agreed to give him the money in cash that day.
“I needed the money to pay for a car that I wanted to buy and I had called the bank days in advance to make sure that it would be possible to get hold of the funds, so I was shocked and annoyed when the branch said no.”
Mr Morland contrasts this experience with the service that he has received from Nationwide. He holds two Isas and a postal savings account with the building society and says that it has kept its promise to offer ease of access, plus a consistent rate.
Having immediate access to funds is more important to Mr Morland than receiving the best rate on the market, but he adds: “Obviously, if it is possible to have a good rate that is guaranteed to last for a long time and with no restrictions, then I would go for it because that would be the best of both worlds.”
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REBECCA O’CONNOR