Consumers could be getting a bad deal on savings accounts as a result of poor communication on interest rates from banks and building societies, Which? research has found.
Only 17% of savers knew exactly what interest rate they were getting on their savings, according to a survey of 3,824 members of the public conducted on behalf of Which? by market researchers GMI.
Most savers use online banking to manage their accounts, but NatWest, the Royal Bank of Scotland, the Co-operative Bank and Britannia don’t show interest rates on their online banking sites, according to our research.
Which? also surveyed banks’ and building societies’ practices when fixed-term or special offer ‘bonus’ rates expire.
We found wide variation in the advance warning given to savers before the end of their fixed-term or bonus rates. Of 18 providers surveyed who offer bonus rates, 12 contact customers at least two months in advance, but two give the legal minimum of two weeks’ notice. Leeds Building Society contacts customers between six to 15 days before, which we believe could be in breach of regulations.
The notification letters sometimes use language like ‘you don’t need to do anything’ – but if savers don’t take action, their money could end up locked up for a fixed term in a zombie account paying a low rate of interest. Eight savings providers renew fixed-rate accounts automatically. Of those, Aldermore, Santander and Bank of Cyprus UK have no cooling-off period, meaning consumers face lost interest or penalty charges if they decide to withdraw their money.
Scrap the savings trap
Our Scrap the Savings Trap campaign is calling on banks and building societies to stop consumers from missing out on better deals by displaying interest rates prominently and consistently on all statements, annual summaries and online pages and improving notification about the end of bonus rates or fixed terms.
As part of its investigation into the cash savings market, the Financial Conduct Authority should work with savings providers to address these issues and identify the best way of notifying consumers about the end of deals to prompt them to switch accounts.
Which? executive director, Richard Lloyd, said: ‘This is further evidence that the savings market isn’t working in the best interests of consumers. With interest rates at a historic low, providers must do more to help their customers find the best deal. They must be crystal clear about interest rates and let people know when bonus or fixed rates come to an end to prompt them to shop around.’