It appears that, in the UK, some of the best bank savings deals are very much a case of ‘the large print giveth, and the small print taketh away’.
Which? has done a little digging into the pile of ‘too good to be true’ banks & savings offers, and has found that many savings deals offering 5%-8% interest carry many restrictions and strips of red tape, tangled around the benefits that seduced you in the first place.
While the large print screams ‘interest of 8%’, deep down in the small print may lurk a clause that holds you to paying in a certain amount every month for at least a year, perhaps without withdrawals. You can even be penalised if you seek to maximise your income, by paying in too much.
Another nifty practice is selling ‘tied products’, where 2 deals are bundled together on the basis of ‘you have to take one, in order to get the other’.
This type of deal is causing concern in many banking markets, not just affecting UK bank savings, but throughout the EU. The most common example is where you get a current account, only if you promise to pay in your salary every month. Other lenders use their best mortgage deals as ’gateway products’ to further business, by forcing homebuyers to take a credit card, before their mortgage is approved.
One UK building society was recently offering a generous 6% rate on a ‘combination bond’, only if you agreed to invest in a less attractive bond at its sister company, at the same time.
A less obvious benefit (for the bank) is the ‘double link’ to the customer. If you have 2 products instead of one, it is harder for you to switch to another lender, further down the line.
The EU has logged 572 million sales of ‘tied products’, where customers may have entered into a deal they might not otherwise have chosen. Harsh words such as ‘choice distortion’ and ‘coercion factor’ are being used in relation to the hoops young couples have to jump through, to get that great savings deal, or that elusive first mortgage loan.
Have you had experience of being sold a product you didn’t really need, bundled in with the mortgage or savings account you wanted? Tell us more – blog here!
