Is It Worth Moving From Chase at 1.5% to Virgin M Plus at 1.56%

RG2015

jbrassy said:

Daliah said:

£25K in:

• Chase: £375
• VM: £427.50
• Al Rayan: 450

Mind you, if you are certain you don't need the money for a year, you might as well go with Oak North for £712.50.....

Al Rayan bank sounds interesting, but their website says:
"As an Islamic Bank, we do not offer you interest on your funds, instead, we undertake Sharia compliant activities with the intention of generating profit, which we then share with you".

Therefore, is there any risk attached to this account in terms of the rate you might get? Suppose the bank doesn't have a terribly profitable year, does that mean it might pay only 1.6%?

If they did they would lose trust and lose business.

Once they had lost trust they would never get it back so their business would fail.

So that is why they always pay the expected rate.

Daliah

In theory, yes they could drop the expected rate. In practice, they never have, and they would also give you notice so you can move your money elsewhere. Also, they are paying interest profit monthly. I have held various savings accounts with them over the years and not seen them default once.

Bigwheels1111

If they could not continue to pay 1.8% they would advise you of this fact.
Give you time ie 30 days to move your money.
But they will pay your interest at 1.8% until you move your money or the 30 days are up.
According to Mse none of the sharia accounts have failed to pay profit.

Ballard

Although I know a little about Islamic finance I’m no expert but I think that they’re unable to offer a guaranteed rate for such a flexible product if they’re to keep it compliant with Islamic law. To all intents and purposes they can be treated as with any other deposit. 

Fixed deposits can have a fixed rate as they can technically have a commodity behind them. An example would be placing £50k with them. They sell you £50k worth of aluminium today, immediately buy it back at a higher price with a delayed payment date of a years time. You don’t see this commodity transaction but this eliminates the concept of interest.

edit: illuminates replaced by eliminates. 

crumpet_man

Illuminates or eliminates?

Ballard

crumpet_man said:

Illuminates or eliminates?

Blooming autocorrect (and lack of interaction by me)!  Eliminates. 

phillw

jbrassy said:
Suppose the bank doesn't have a terribly profitable year, does that mean it might pay only 1.6%?

Yes, but I'd expect them to give you notice of the drop in expected profit.

Sharia banking is based around ethics, it limits what they can invest in but they have a lot of customers that can only deal with Sharia compliant banks.

There are no guarantees in any bank, if it fails in some way then you lose whatever interest they were offering. In theory Sharia banks should be better suited to survive.