A Word of Warning Chelsea Building Society

Rafter

Doesn't every financial institution do that? A bit unfair to single out the Chelsea. If you look at any bank that offered a juicy savings account 3 years ago it will now be paying a worse rate, probably below base rate.

Why? Because if it wasn't that financial institution would have gone bust.

Let's say I try to buck the trend and launch 'moneysavingbank.com'

Try 1....

I want to be fair to my customers over the long term so I launch mortgages at 1% over base rate and savings at base rate. The 1% difference is enough to cover my bad debt costs and to pay the salaries of my staff.

Problem is nobody wants my products because they can get more juicy savings and more juicy mortgages elsewhere and I go bust.

Try 2.....

Ok - I'll try again. I'll launch juicy savings at 0.5% above base rate and mortgages at 0.5% above base rate too. I get lots of business. Problem is I cannot afford to pay my staff and as soon as I get any bad debts my savings customers are going to be upset that I cannot afford to pay them back.

Try 3.....

I launch savings at 0.5% above base and mortgages at 0.5% above base, but over time I cut the savings rate to below base and increase the mortgages a bit too. Oh and I start to charge some fees on top and cross sell insurance and other products with good margins.

Bingo - I attract new customers and grow. I make enough money to pay my staff and cover my bad debts. I get a few complaint letters from savers who realise they could get a better rate elsewhere by switching and people moaning about charges and miselling, but hey, at least they can take their money out and I'm still in business.

R.

Milarky

Absolutely. Loyalty 'sucks' for both customers and the banks. However no one would admit to this for obvious reasons (Gerald Ratner?)

bristolleedsfan

certain building societies have over the years behaved worse than others for keep launching new accounts and letting previous best buy accounts sink to low depths.

someone could look up all of skipton BS branch based instant access accounts that are now closed issues for another good example. :mad:

most building societies are now trying to be the "good guys" chelsea BS has continued with its previous bad behaviour, failing to pass any of the last 3 base rate rises on in full on its reg saver account as well . whilst i agree with the O/P i believe the language used in first two posts was over the top, and looked like a vendetta. :eek:

barak

KingKenny wrote: »

I do not bank with them...

I agree that their current 30day account is not attractive as it has no rate guarantee, but did you miss out on their recent 40day and 20day accounts paying BOE+0.6% and BOE+0.5% respectively for 12 months? They were certainly competitive.

Milarky

bristolleedsfan wrote: »

certain building societies have over the years behaved worse than others for keep launching new accounts and letting previous best buy accounts sink to low depths.

I think this could be tackled by a revised Banking Code. At the moment banks merely have to contact customers once they have let rates drift away from the BOE rate by more than 0.5% in a year. Obviously the same banks lobbied for this clause to be as watered down as possible to allow them to do precisely that - allow rates to drift for up to 12 months and then leave it to the customer to request a change of account. Reverse the onus. Make banks responsible for (say) paying the higher a two rates on all their accounts - the rate on the account itself (which may be very good) or the 'average' rate it pays on all accounts (half a loaf better than none) That has the virtue of making them be explicit about the two tier rates they use - but also limits them from cutting rates on account below the average (because, let's say, the rule then would not require a notification.) Not a perfect solution, nor one without 'costs' to other customers, nor even one likely to see the light of day if the banks have to agree it. But BC is the quickest route to removing the worst 'excesses' and if it can be used to 'chip' away at these through regular revisions we all benefit.

bbruce

Why not close your account?
Is there a chance of a carpetbag one day?

nilrem_2

TBF to Chelsea I have held both savings accounts and a mortgage account with The Chelsea since 1980 and have always found their service pretty good, over the years I have had a substantial amount saved with them (still hold several fixed rate accounts), as with all saving accounts one must read all the info and consider carefully before investing ones cash.

I will say that I have always found my dealings with Chelsea on the phone and in person to be both friendly and efficient, something I could not say about some others inc Birm Midshires whose customer relations and efficiency leaves a lot to be desired (IMHO of course)!

I think people forget that financial institutions are businesses not charities they are out to make money and will do what they can to maximise profit, it's up to the customer to sort out the wheat from the chaff!

bristolleedsfan

barak wrote: »

but did you miss out on their recent 40day and 20day accounts paying BOE+0.6% and BOE+0.5% respectively for 12 months? They were certainly competitive.

are they competitive now , makes me dizzy just attempting to look at all of chelsea accounts past and present. :eek:

http://www.thechelsea.co.uk/html/savings/invest_intrates_old_current.html

http://www.thechelsea.co.uk/html/savings/invest_intrates_current_current.html

barak

bristolleedsfan wrote: »

are they competitive now , makes me dizzy just attempting to look at all of chelsea accounts past and present. :eek:

http://www.thechelsea.co.uk/html/savings/invest_intrates_old_current.html

http://www.thechelsea.co.uk/html/savings/invest_intrates_current_current.html

No, they are no longer available.

Rafter

nilrem wrote: »

I think people forget that financial institutions are businesses not charities they are out to make money and will do what they can to maximise profit, it's up to the customer to sort out the wheat from the chaff!

Nilrem,

Building Societies are not out to maximise profits because they are owned by their members.

Generally building societies pay better rates to savers and offer better rates on mortgages and offer better service to their customers because they don't have to pay an element of their profits as dividends to shareholders. Instead, as a member you get the benefit instead.

Others argue that because they aren't motivated by maximising profits they are less efficient but I like to believe that the likes of John Lewis, Building societies and the Co-op not run in the interests of shareholders seem to do rather well and certainly be less prone to misselling scandals and taking shortcuts with service or quality in order to boost profits.

As Milarky says above though, without some sort of regulation to prevent abuse of customer loyalty through rate cutting, even organisations run for their customers have to use the same tricks, otherwise they wouldn't attract new members and would just wither away over time.

Kind of suggests that the rules do need to be changed. And that the Banking Code shouldn't be something written and policed by the banks themselves!

R.