Why?

bratfud_lad

Why do banks put us through the annual ritual of having to change savings and ISA accounts by dropping the interest rate on last years best buys to 0.5% or less thus forcing us to search out new "best" accounts and go through the hassle of setting up new accounts and moving money?

Surely the first bank that has two accounts only, one saving and one ISA and promises to keep the rates competitive year after year would be on a winner? Or is this all too simple? :doh:

glider3560

Because most people won't shop around when their rate drops to 0.5%, thus providing the bank with a cheap source of funding.

If a bank provided constant rates, they would be considerably lower than the market leading rate. E.g. National Counties Building Society's ISA has been 1.81% since the BoE rate last dropped. It isn't a great rate but has remained very constant.

bratfud_lad

just been looking for an ISA I can transfer my Santander Issue 6 (just dropped to 0.5%) into but they all either want you to open a current account ie HBOS or can only get money in and out by going to the branch or posting cheques.
Other ones (like Santander) don't allow you to transfer in hence moving the Santander money in wont allow any more ISA saving this year.

I give up seeing as interest rates are so pitifully low its not worth the hassle. :mad:

glider3560

bratfud_lad wrote: »

just been looking for an ISA I can transfer my Santander Issue 6 (just dropped to 0.5%) into but they all either want you to open a current account ie HBOS or can only get money in and out by going to the branch or posting cheques.
Other ones (like Santander) don't allow you to transfer in hence moving the Santander money in wont allow any more ISA saving this year.

I give up seeing as interest rates are so pitifully low its not worth the hassle. :mad:

Halifax don't need a current account.
No current account = 3.00%
Reward current account funded with £1000 every month = 3.20%

opinions4u

bratfud_lad wrote: »

Why do banks put us through the annual ritual of having to change savings and ISA accounts by dropping the interest rate on last years best buys to 0.5% or less thus forcing us to search out new "best" accounts and go through the hassle of setting up new accounts and moving money?

Let's say typical easy access rates at the moment are 3% on bonus and 0.5% off bonus.

Bank A decides to pay all customers 1.5%.
Bank B decides to pay new customers 3% for a year and 0.5% after a year.

1) Not many people will open a new account at bank A.
2) Some bank A customers will move their money to bank B.

If you can solve these two problems and still make a profit, get in to banking. Those in charge would love to change it, but without illegal cartel activity it isn't going to happen.

Surely the first bank that has two accounts only, one saving and one ISA and promises to keep the rates competitive year after year would be on a winner? Or is this all too simple?

No. They would see old money flowing out and no new money coming in. They'd end up insolvent.

they all either want you to open a current account ie HBOS

3.0% with no current account. What's your problem?

or can only get money in and out by going to the branch or posting cheques.

Life is hard for you.

Other ones (like Santander) don't allow you to transfer in hence moving the Santander money in wont allow any more ISA saving this year.

I give up seeing as interest rates are so pitifully low its not worth the hassle.

On a £5k balance moving from 0.5% Santander to 3% Halifax would be worth £125.

It would take less than an hour of your time.

How else would you earn £125 an hour?

Loughton_Monkey

Why do supermarkets do all the BOGOF or so-called 'price cuts' all the time.

No specific price at any specific time has any specific significance. It is just part of an overall strategy to get you to shop there, and to 'believe' they are cheaper (or better) than anyone else. They plan to make a profit out of you somehow.

If you take any bank's 'position' on mortgages, then these mortgages must be funded. So it is essential to take whatever marketing/price action it needs to pull in the correct amount of deposits. If, alternatively, your focus is on deposits, then you need to take whatever marketing/price action necessary to get it all lent out at a higher rate with good security......

Any bank will tend to have a different focus at different times. Sometimes profitability. Sometimes size. Sometimes a higher number of customers. Sometimes a 'higher class' of customers - or perhaps a 'lower class'. They are all, at any one time, desperately looking for an angle or edge to single them out.

Given the huge (and growing) amount of Internet traffic, the 'work' involved in gaining and losing accounts all the time is far less than what it was when everything was 'passbook' based.

Just imagine supermarkets were 'exactly' the same. In other words, imagine a set-up with reliable and instant 'free' delivery. And imagine that we had up-to-the-minute web sites with every single cost. We would 'launder' our shopping list through "Weekly Grocery Dot Com" and get the milk, eggs, and washing powder delivered by Asda. The mince, bread, and gin delivered by Tesco. The tonic, bog rolls, and cream cakes by Sainsbury. The baked beans, wine, and tuna by Waitrose. And the rest by Co-op, Marks & Spencer, and Morrisons.

We'd save enough to put into an ISA!

Milarky

glider3560 wrote: »

Because most people won't shop around when their rate drops to 0.5%, thus providing the bank with a cheap source of funding.

If a bank provided constant rates, they would be considerably lower than the market leading rate. E.g. National Counties Building Society's ISA has been 1.81% since the BoE rate last dropped. It isn't a great rate but has remained very constant.

That is precisely the correct answer. 'Market Leading' wins you lots of coverage and short term cash inflows. I saw on emoneyfacts yesterday that Principality has raised their newly launched ISA rate (3 year chart topper) from '4.17' to '4.22' just to pip the Leeds who had come out with a rate of '4.20'%!

With ISAs there is also the 'fear' of losing tax-free status which banks can play on. In other words ISAs suffer from more 'inertia' than normal savings would.