Withdrawal penalties on online savers ???

intalex

Looking at the competitive market for online savers, what are everyone's views regarding those online savers which still incorporate those bad old penalties for withdrawals?

oldfella

if you have money you dont need to touch, and the interest reward is attractive compared to the non-penalty accounts - then it makes sense.

Mike

patwa_2

I agree with Mike above. These accounts usually have higher interest rates and banks hope customers will deposit larger sums of money into them. They're not designed for your monthly salary or for day-by-day interest-grabbers (e.g you move your money in, then out again when you want to spend it, trickle feeding it in and out).

So my opinion is that the monthly interest penalty is justified. After all, ifyou've got 50k in there, and you take some of it out, the supposition is that you need that money for an important or large purchase, and hving earned much more interest than in a regular bank account over the preceeding months, that one month's interest loss would be OK.

I do feel sorry for customers who don't read the small print, then get stung with the interest loss (and yes, I include myself in that group. Luckily a nice lady at First direct advised me of the interest penalty when I called to question it, and refunded me my interest for the two months I went without, as long as I did not do it again, on pain of death - OK not really but I got the hint).

so yes, it's all fine just as long as you use the account for its intended purpose.

BSingh

Online savers are a good place to keep your money for a short period of time, say if your current account does not pay much interest... just put it in the online saver for a bit.....providing you do not get charged (i.e. lose interest) for withdrawals!

patwa_2

True, but as more and more online savers are now levying that interest penalty, it's worth checking the T&C's. It's another way in which banks try to both save money on the one hand and tempt more capital investment on the other.

intalex

patwa wrote:

I agree with Mike above. These accounts usually have higher interest rates and banks hope customers will deposit larger sums of money into them.

Two things here:

(i) Do they really offer more interest rates? The best interest paying online savers (the Indian one and the Icelandic one) have no withdrawal penalties.

(ii) Personally, I don't dig the idea of losing a month's interest on the entire amount. A fairer way of dealing with withdrawals would be to apply interest on the lowest closing-day balance for that account in the entire month. That way, you do not lose interest in that month for money you never withdrew, and you don't earn interest on any additional deposits which you make. It is customers with large sums invested and small withdrawals made who suffer the most because of these clauses. Most of them are unaware about the small print as stated in your other post, whereas others have no choice but to touch these accounts in the event of a need.

These online saver accounts appear to be electronic versions of instant access savings accounts which pay more interest than normal instant access savings because they are less expensive for banks to operate. I feel these penalties don't suit such accounts, and in fact should only be applicable to fixed deposits which are actually meant for long-term investments.

At the end of the day, the competitive online savers don't charge penalties, and I'm failing to understand why customers continue to stick with banks that do charge these penalties. After all, the interest rates aren't any better.