Bank customers must be feeling that they’re being battered on all sides at the moment. At the same time as banks are reducing the rates of interest that they pay on many accounts they are also serving notice that they intend to increase arranged overdraft rates on current accounts from April.
There seems to be no hiding place for customers to go as they see their interest squeezed at the same time as the cost of borrowing is increasing, often to startling levels, even when they have taken the time to agree the overdraft with their bank.
The banks are blaming the Financial Conduct Authority for the increase in overdraft rates, saying that it is the FCA that has told them to equalise rates for arranged and unarranged overdrafts. While that is true, the FCA never told the banks that they had to equalise rates upwards, they could equally have reduced the rates for unauthorised overdrafts to the lower rates that they currently charge for arranged overdrafts.
But that would mean less money for the banks, so you are never going to see them doing that! And as usual it’s customers, and particularly in this case vulnerable customers who are short of money in the first place, that will suffer most.
I saw an email from one of the big banks the other days telling me that the rates on its basic saving account was being reduce from 0.3% to 0.2%. That’s a 33% reduction. And nothing has happened to mainstream interest rates to push them into making that reduction. The email actually read ‘Following a review of our savings rates and those offered by other banks and savings providers we’ve made the difficult decision to reduce our interest rates from 13th February 2020.’
So basically the banks are acting as a cartel and what one does the others feel that they have to do as well?
The one bit of light in amongst all of this gloom is that the FCA are suggesting that banks need to stop reducing rates on savings accounts for established customers, especially when they are doing to in order to increase rates on other accounts to attract new customers.
One of the FCA’s suggestions is that banks will have to offer an account with a guaranteed long-term rate of interest that won’t be reduced once existing customers invest.
We’ll wait to see what happens with this one.
In the meantime it’s really important that we all do what we can to try to stop the bank’s greedy practices. If you have money in an account that is earning little or no interest then move it. Have look at some of the comparison sites and transfer your savings. Move your money to the account paying the highest rate of interest that you can find. Granted it won’t be much at the moment but every little helps, and the money is better in your pocket than the banks’s.
You worked hard for the money, don’t let the banks rob you of the opportunity to earn at least a little bit of interest on it.