Why bother with lower rates?

willmow

With some rates clearly better than others, why would anyone bother putting their funds into ISAs offering inferior deals? In other words, why isn't everyone looking for the best rate putting their cash into, say, the Coventry BS's Poppy ISA, and why don't other providers attempt to match that best rate to get a slice of the action?

innovate

willmow wrote: »

In other words, why isn't everyone looking for the best rate putting their cash into, say, the Coventry BS's Poppy ISA

How do you know that not everyone is looking for the best rates? As far as the Poppy is concerned specifically: because, for instance, you cannot transfer old ISAs into it. Some people have better, existing, deals elsewhere. Some people have a virtual umbilical chord to a certain organisation. Some people get more in an ISA Regular Saver than in the Poppy. Some people get more in a current account or in a normal Regular Saver than they would in an ISA. And so the list goes on

willmow wrote: »

why don't other providers attempt to match that best rate to get a slice of the action?

they do not need saver's money, given schemes like funding for lending

willmow

innovate wrote: »

Some people have a virtual umbilical chord...

I love the idea of an umbilical chord: kind of foetal music

MisterMotivated

To echo innovate's point, there are many reasons. For me, the difference in interest between the Poppy ISA and my 123 account would be small, so I don't want to register with yet another financial institution for a minimal benefit (already have accounts with 5 different banks), especially one where I can't just nip into a local branch 2 seconds from work if I need to. Also, keeping my former ISA money in my 123 a/c means I get 2.4% net on all the money in there, but filling an ISA would mean the remaining 123 balance drops into one of the lower interest brackets.

While I'm all for going after good deals, there are sometimes compromises to be made, eg when the extra return doesn't justify the extra effort involved.

willmow

Thank you. Slowly getting the hang of this ISA lark.

opinions4u

why isn't everyone looking for the best rate

1. People can't be bothered.

2. People will only deal with their main bank.

3. People will only deal with a face to face operation on the high street.

4. People will only deal online or by phone with a firm they already have a relationship with.

5. People value a level of service or convenience ahead of return.

and why don't other providers attempt to match that best rate to get a slice of the action

1. Because they can raise money for less elsewhere.

2. Because if they went best buy they would increase flows exponentially even if they don't have anyone to lend that money to.

3. Because best buy is often a loss maker.

katejo

Because I am not rich enough to lock the money away for an extended period. It would be sod's law. Just as I had invested in a 3 year fixed rate (or similar), the boiler would die...

Also put off by accounts which can't be accessed online or which will not allow transfer from a previous ISA.