High interest rate – but for how long?
Good interest rate – but for how long?
Beware those introductory rates on bank and building society deposit and investment accounts.
You cannot be blamed for looking at the headline rate, but look for the small print. The adverts often use symbols like * and # which lead you to further explanation at the bottom of the page, or in the small print.
You invest your money expecting to get say 2.5%, which you will do, but then you find the rate drops after a set period, often twelve months
The example we offer is an internet advertisement for a high interest current account from Santander we saw on 3 October 20010.
Looks great, but then read on, and it tells you:
High interest current account
“· 5% AER (fixed for 12 months, changes to 1% AER variable after 12 months) on balances up to £2,500, when you pay in £1,000 a month.”
So at the end of 12 months you drop back to a pretty ordinary looking current account. Nothing dishonest about that, the explanation is clear, but are you attracted by the headline rate? Santander are obviously keen to have your current account as it is here the banks make money by earning a better rate of interest, on your money, than they pay you. We make no criticism, it is just we searched on Google for “high interest” and up popped this information.
There are a great many other examples we could pick out. The banks and building societies have to tell you when your interest rate is changing. You will receive rather dull letters or booklets, but do take careful note, as a year later when your annual statement comes through you may be disappointed.
Let everyone benefit from your tips and experience.