Why 'Only New Money'?

Meltdown_2

I have been looking at destinations for my cash ISA money for next year, and was finding a lot of the 'new money only' & 'no transfers in' type of thing - probably inevitable since they often seem to be among the higher rates offered.

But I got to wondering, with all the credit-crunch issues, why doesn't this (or that) bank want my money?

I can understand the 'loss-leader' argument on certain savings accounts (e.g.regular savings accounts) and had assumed that the same principle was applying to some of the higher-rate cash ISAs. But does it really make that much difference to them whether they get £9000 from me (say) or £3000 from 3 different customers.
(I know it's £3600 next year - above figures are illustrative only).

Of course it makes a difference (I hear you say) - 3 opportunities to flog something is better than one.
Fair enough, but no-one is going to sell me any product that I don't want, so why should 3 potential "sales clients" be better than one - if none of them are prepared to accept rubbish touted to them as a good thing.

Wouldn't one expect people opening ISAs to be a bit more financially savvy (or better advised via IFAs etc) than in general?

Is it simply true that the banks think we are all/mostly stupid as regards financial products? Are they right?

bristolleedsfan

I guess the organisations concerned are confident that they can get the funds that they require without the administrative work and costs thats involved with transfers.

Also saying no transfers is the only way the organisations can avoid funds merely getting transferred from within the organisation. ( if thats what the organisation doesnt want to happen)

A lot of ISA providers dont accept transfer ins whether they pay high rates or not.

dunstonh

People who transfer are just as likely to transfer again. The cost of transfer bascially wipes out any profit that may have existed for probably around 2-3 years. At a guess, around 90% of new money is likely to stick whereas transferred money is likely to move on once the terms are less attractive and more profitable.

earlgrey_3

The reasons are obviously as D and BLF give but seems a little ironic when even the government National Savings now won't accept transfers into their NS&I Direct ISA. If all providers did the same then the government's stated concept of a portable personal savings plan couldn't work.

And of course if the providers didn't so cynically manipulate rates to entice savers in with temporarily high rates, there wouldn't be the need to constantly move around. The result is higher admin costs and the losers are the more trusting souls who don't constantly check the rate they're getting.