Cash ISAs: A gift to the banking sector

p00hsticks

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

But that's only on the first £5000 - less than the annual ISA allowance. All of these interest paying current accounts only pay up to a certain (fairly low) limt - Nationwide pay 5% but only up to £2,500 and Santander 3% up to a reasonably respectable £20,000.

People who've been making use of their full ISA allowance since they were introduced (and the fore-runners) are looking for homes for six figure sums now ......

laptop80

John1993 wrote: »

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 wrote: »

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.

As with energy companies, I think it's a symptom of the myriad products they now offer. Older customers who've been with the same provider for many years can have very different expectations from consumers today. If you've always had a savings account with Lloyds and paid British Gas for your bog-standard gas bill then you simply haven't been conditioned to hop around providers, products and issues / version numbers every year like we are expected to do nowadays to get a reasonable rate. I remember you used to regularly hear about sums that had been left untouched in accounts for years and accrued huge amounts of compound interest; seems unlikely today, as the account would most probably be defunct interest-wise after a year or two.

The requirement for constant chopping and changing is now normal but is baffling to a lot of people and means they lose out, often susbtantially. The problem has been rightly recognised in the energy industry and they are being forced to do something about it. I don't imagine that banks will be very far behind.

I would hazard a guess that the problem is compounded in the older generation who thought that the bank manager was someone who they could trust and was actively seeking to help them, not just themselves. For all I know this might be a myth - I'm certainly not old enough to think of banks any differently than other businesses - but my conversations with older people do suggest there's some truth in it.

John1993_2

laptop80 wrote: »

As with energy companies, I think it's a symptom of the myriad products they now offer. Older customers who've been with the same provider for many years can have very different expectations from consumers today...

I agree, and we do now live in a time of very complex tax laws, benefits, and competing financial companies.

To some extent I suppose that it's actually as a result of trying to meet every possible need that a customer might have. While once you'd put your money into a savings account at your local branch, people will now expect to be able to find something tailored to their precise needs, which means that companies are faling over themselves to slice and dice the market in so many ways to offer just the right thing to every potential customer.

If banks were able to sit back with a captive local audience, and charge slightly fatter fees, then the profiferation may never have happened, but I think that it's an inevitable result of greater customer knowledge, and increased demands to value for money.

atush

The requirement for constant chopping and changing is now normal but is baffling to a lot of people and means they lose out, often susbtantially. The problem has been rightly recognised in the energy industry and they are being forced to do something about it. I don't imagine that banks will be very far behind.

I agree with this, and think that we have already seen the first signs. Wasn't it a recent change that banks have to tell you your interest rate and if they have better ones at the end of a deal? Or was this just proposed?

Ologhai

opinions4u wrote: »

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.

There must be some good reason why banks think it's to their benefit to offer better IRs on current accounts than savings accounts and ISAs, and this very well may be it, but at the same time I'm kind of surprised. Santander requiring at least two DDs is presumably intended to force some level of commitment (and current account type usage), but the Lloyds-TSB/Bank of Scotland route where one can open six accounts (three each at the two banks) where the only requirement is to set up appropriate SOs between them and then forget about it is surely not enticing many to move their current account to a new bank?

The requirement to open more than one account to get 3% on more than £5k seems to reduce the chances of anyone thinking of the account as a current account at all. I think that opening six accounts would reduce the chances of me treating one of them as my main current account.

In short, Lloyds and BOS may get £30k out of me (upon which they intend to pay 3%), but it doesn't entice me into anything further; unless they offer something else in the future that offers a market-beating IR of course.

MoneySaverLog

There's also a requirement to have 2 DD's on each vantage account, and reward current account with Halifax too. So similarly they are targeting main current account holders.

KingL

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

btw, note that the 2.96% Gross is only on the £3000-£5000 tier. If you have the max (useful) balance of £5000, you're only getting 2.27% on the whole pot

talexuser

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.

That would go against the new liberal economic thinking of the past 30 years or so. The whole point is the savvy will get the best deals because they are more savvy than the rest. By definition the less savvy will be paying for those best deals? Same way the very rich are getting more and more of the cake compared to the rest of us?

opinions4u

KingL wrote: »

btw, note that the 2.96% Gross is only on the £3000-£5000 tier. If you have the max (useful) balance of £5000, you're only getting 2.27% on the whole pot

I originally read it that way.

But you're incorrect.

KingL

opinions4u wrote: »

I originally read it that way.

But you're incorrect.

Interesting. Would you be kind enough to share your source info. Much obliged