Savings account? Losings account more like!

MrMartyn

With interest rates so low and inflation so high, isn't it inaccurate and misleading to describe an account as a "savings account"?

If a lump sum deposited in such an account is actually losing its value as time goes on, due to an interest rate that is well below the rate of inflation, wouldn't it be more accurate to describe it as a "losings account"?

Are banks therefore not misleading their customers by marketing their products as "savings accounts" when in reality those accounts actually erode the money that a customer deposits?

Is a "savings account" that pays less than 2 percent annual interest, at a time when inflation is well over 4 percent, really fit for purpose?

I wonder what the trades description act would say about this?

I would like to see banks forced to market their products in a more honest and realistic way, instead of ripping off customers by paying pathetic rates of interest.

Cheers,
MrMartyn

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability for anything I post here.

blinko

buddy on the grand scheme of things savers are getting a whoopping 6 times the base rate (3%) on some accounts.

I know how annoying it is to get ripped off by the banks and they pay u low interest rates and then move it down without telling u.

Totally nasty tactics but really and truly they run a business and there are people out there that don't pay any attention to rates.

Its upto us to shop around and generate the best return for our money the banks as we have seen can get away wth what they want !

ses6jwg

most of us moved in equities after the markets crashed and have seen 3 figure returns.

100% cash is for fools

Ark_Welder

Savings, in the context of a bank account, describes the money that you have left from your income once all bills and outgoings have been paid. Therefore, A valid term to describe these accounts.

MoneySaverLog

I am in agreement with the OP, they are losing accounts. But having money invested in the markets can also be risky. Shares can go down as well as up with risk to the original capital, unless you can correctly identify those stocks and short them.

It's the best of a bad situation, hopefully inflation will drop over the next 12 months and then we'll see an increase in interest rates but until such time where else can one invest ones money with 100% security on investment, with a return guaranteed to beat inflation? The only place I can find is NS&I.

Loughton_Monkey

As has been said, the word 'savings' is usually attributed to the money you have received, but not spent. Hence it is saved.

You have many choices about where to save it. In a little pig on your mantlepiece. In the bank down the road in a 0.5% passbook account. In an Internet accout at 3%. In an Internet fixed rate account at 4.5% or so. On some of these you can choose an ISA wrapper and save tax.

Now as far as I have seen, High Street Banks tend to describe these accounts quite accurately - sometimes in print a little bit too small. They are generally 'safe' [unlike the pig on the mantlepiece]. And at 2.5% above Bank of England Base Rate, some would say this is a 'good deal'.

Now tell us why banks have any 'duty' to pay you more than inflation? Can banks affect inflation? Control it? Lend money out at rates sufficiently higher than inflation to pay savers higher rates than inflation too?

In short, what has inflation got to do with High Street Banks Savings Accounts?

I would give you more reasons why your point is fatuous, but forgive me. I have to prepare my own 'rant'. I bought a UK made television, in UK, with a UK plug, designed for 240 volts, with a manual that stated 'for use in UK only'. And now I learn it's an absolute rip-off, because I want to use it in USA where they have 110 volts, different sockets, and a completely different TV system. They should have called it a "Non USA Television" so idiots like me wouldn't be conned.

k9oky

I see where your going MrMartyn but I think your missing the picture like many seem to by reading the headlines it's no wonder though.

There is the Earth and the Moon, Ying and Yang, for every action theres an opposite and equal reaction, Wife and Husband etc etc

In savings terms (inflation adjusted) Ive had 20 years in standrard savings accounts like you mention and this period yes I'm effectively loosing a little in real terms but the many years I've had infront this is a bad time but I've had many more years of good times - saving is for the long-term in my opinion. During this phase I'm trying to minimise my loss as best I can, but am happy to have made such gains for many many more years. In the saving world for the past few years its been raining and I put the umberlla up and try my best not to get wet - i get some drops but I'm not soaked like the other guys without no umbrella - however hopefully summer will be here eventually and we can bask in the sun again! What I'm trying to say is there are good times and bad times ya just gotta live with it and do the best you can - but it's easy for people in the bad times to only think about the bad times - let's look past this!

MoneySaverLog

They are losing accounts at the moment, unless you get at least the rate of inflation, e.g. with index linked saving certificates.

Classic example £1,000 invested in a bank at 3% Gross, works out at 2.4% after basic rate tax. Inflation is at 5% you would need the equivelant of £1,050 in one years time to have the same spending power as you have today for your £1,000 However you only get back £1024 from your bank. So you have lost £26 in spending power by putting your money into a "savings account".

Now granted, you got a better return than leaving it in a "piggy bank", you'd have lost the £50, but the banks did keep your money safe from burglars so like I said, until the BOE increase rates as predicted they will do, and inflation drops you have to put up with the best of a bad bunch.

erdd2

MrMartyn wrote: »

With interest rates so low and inflation so high, isn't it inaccurate and misleading to describe an account as a "savings account"?

Is a "savings account" that pays less than 2 percent annual interest, at a time when inflation is well over 4 percent, really fit for purpose?

As a saving account, it is an account where you deposit your savings and unless paying fees, it is for you to choose best for your interests, wants and needs.

Fluctuating factors of interest rates, inflation, state of economy, Wullies pocket money demands etc are peripatetic and unless you have "fixed" conditions, these factors are for your and not your banks consideration to control, monitor and make decisions.

nzseries1

I'd agree with the OP, and in fact this is how Martin Lewis himself refers to savings accounts currently available, in this news article:
http://www.moneysavingexpert.com/news/banking/2010/07/no-savings-exists-theyre-all-losings-accounts
and in the main savings online guide:
http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

HMRC100

Why this obsession with inflation at 5.0% or whatever?
The figure quoted is a generalised figure. Inflation is actually specific to an individual and that rate varies for each individual.
I suggest that people calculate what their personal inflation rate is before ranting about % rates.
However I suspect that most of the people having the rant are unable to do such a calculation and are in fact brainwashed by media hype.
You might actually find that your rate is much higher and then you can really rant.
Some goods and services that I buy/use have actually gone down so my inflation rate might be lower than this magical 5%.