Cash ISAs: A gift to the banking sector

laptop80

100saving wrote: »

sounds like you should start a government petition? I know a few people would sign it.

http://epetitions.direct.gov.uk/

I can see a number of sides to this as i don't think its right that you can earn more from current accounts (in some cases 2-3% more) than you can on ISAs. But banks are a busniess and need to make a profit in a number of areas.

I think the gov. should set a law that ISAs must have the highest interest rate by say 0.5 or 1% more than any other account (savings or current).

but you can beat the low ISA rate if you are willing to do the work and are not in the higher tax band. but not many people will get more than an avg. of say 3.5% to 4% after a lot of the fixed rates end 6 months to a year or 2.

It would be a big step if they automatically put their customers on appropriate products. It doesn't seem right that people who aren't 100% on the ball so frequently end up sitting for years on accounts with 0.5% or lower rates. Sharp practice at best.

Ologhai

laptop80 wrote: »

I'm of a mind that something really needs to be done.

Quite so, but what?

laptop80 wrote: »

A good start would be the ability to 'ISA' any savings account, encouraging genuine competition on interest rates instead of the ISA being a cash cow for banks.

My initial gut response is that this is a good/interesting idea. I wonder what loopholes banks would find if this arrangement was the way ISAs worked?

opinions4u

would you not agree that FLS has allowed banks to reduce the rates they pay savers

Of course I would. But that's nothing to do with the differential between ISA rates and rates paid on non-ISA accounts.

jackieblack

I find it bizarre that I get a better rate of interest on my Lloyds Bank Vantage current accounts (2.96% Gross) after tax is deducted than I do on my Cash ISA

MoneySaverLog

jackieblack wrote: »

I find it bizarre that I get a better rate of interest on my Lloyds Bank Vantage current accounts (2.96% Gross) after tax is deducted than I do on my Cash ISA

They make more money on current accounts than they do on savings accounts somehow

Reaper

laptop80 wrote: »

When we went to the bank to withdraw the money and put it somewhere more useful the staff seemed incredulous that we didn't want to stick with the whopping 0.5% rate of interest. "But it's tax-free!" they said, as though this overrode the insultingly low interest rate.

As soon as you withdrew it the tax free status was lost. Did you have somewhere to put it that paid a good return after tax? If not you might have been better off transferring it to another ISA provider that offered a better rate.

opinions4u

MoneySaverLog wrote: »

They make more money on current accounts than they do on savings accounts somehow

Not quite.

But once a customer holds a main current account with a bank they are far more likely to buy other products and services.

John1993_2

laptop80 wrote: »

It would be a big step if they automatically put their customers on appropriate products. It doesn't seem right that people who aren't 100% on the ball so frequently end up sitting for years on accounts with 0.5% or lower rates. Sharp practice at best.

I'm curious, what do you think that banks raison d'etre is?

In my opinion supermarkets (and a few other companies) have given people quite a strange sense nowadays of whats normal customer service, with customers feeling that if they did not get the very best product on offer, at the very best price, then they have somehow been "done over".

The supermarkets decided to have an arms race on customer service, to the point that if you went in and told them that you'd eaten the pie you bought yesterday, all of it, but that it was a bit dry, then they'd give you a new pie, and also refund you the original price. This is nice for the customers (especially those who'd stretch the truth sometimes), but at what point did people stop thinking "how nice" and start thinking "It's just wrong to be offered any less"?

IronWolf

You can always withdraw the money from an ISA and put it into a better account if you want.

I don't see how 'the banks' are doing anything wrong. They are not obliged to offer anything at all.

junglejame911

I have to say I disagree with virtually every word of the OP. Your rant is really about interest rates which of course are set by the BOE.

ISA rates reflect the fact rates are at an historic low.

The reason current accounts pay more is that these are the products that are designed to entice you to bank with a particular bank and in time, to buy other products with them. Also the rates will inevitably be temporary and are in fact for relatively low amounts 5-20k so aren't an option for many people with much larger sums accrued in an ISA.

It's hardly "criminal" as you put it. It's business.