MetroBank reduce interest on Fixed Rate interest!

Circle_5555

I didn't understand why MetroBank were telling me of a rate reduction on "my account" when I only had a multi year FIXED rate bond with them. It transpires they pay the fixed rate interest accrued annually into a "feeder" account which only accrues interest at a miserly 0.1% reducing to 0.05% in August. 

I have never heard of such an arrangement before, usually I just "add interest to account" or if that's not an option "pay to current account" and reinvest. However I have just assumed the interest added to account compounds at the rate on the rest of the money in such bonds until the term ends (and is accounted for by the aer figure) .... I don't doubt it was in the small print, but now I am wondering what is "normal" with most banking institutions and thus if adding to account is a good or bad thing?

This is the first time, in many years and many institutions, I have become aware of this "feeder" arrangement with a negligable interest rate! This interest now swiftly removed to Atom 0.5% until it joins other funds for a better rate!

One to be aware of?

colsten

The only “normal” thing with savings accounts is that they all come with terms and conditions. These may or may not be the same for different products, not even with the same bank. You can choose not to read these T&Cs, although you will have confirmed in your application that you did read them, and they will almost certainly detail how & when interest is paid.

An increasing number of fixed term savings accounts offer the option to have interest paid to another account, or even have this as the only option, as opposed to being paid into the savings account. This is often in response to customer complaints, as tax might become due on the interest even if the interest is not accessible for several years hence.

wiseonesomeofthetime

I have a Gatehouse 5 Year Bond which will be paying the Profit Earned each year into an external account.

It was clearly written in the T&Cs that this was the case and that it could not be added to the bond.

I suppose the Metro Bond in this thread has similar T&C.

Or it had the interest to be paid to an external account as a default option somewhere and the consumer had to undertake a positive action to amend it to Pay To This Account.

wmb194

I've had a few of these, all opened online and paying interest monthly, and it was always to the feeder account and there wasn't an option to have it paid to an external account. You also make your initial deposit to the feeder account and at maturity the money is returned to the feeder account. It's a bit odd but I remember being clear on the process when I opened them.