The banks you can't trust

Rachel Wait reveals the worst banks for keeping you in the dark about your savings...

Just recently I received a letter in the post informing me that the interest rate on my Standard Life Direct Access Cash ISA would be falling from 2.65% to 2.30%.

I have to say, this really made me mad. I mean, come on, the Base Rate hasn’t moved from its current 0.5% in months and months (five to be exact). So why, oh why, are savings rates STILL being cut?

But on the plus side, I have to be grateful that Standard Life at least had the decency to drop me a line to inform me that this would be happening. After all, a number of banks don’t always do this. They simply reduce the interest rates on your account and hope you won’t notice. Or rather, they cunningly rely on adverts in newspapers or the chance that you might step into a branch, to spread the news of changing rates.

In fact, research from Which? Money has revealed that only five out of the 12 banks or building societies it investigated guarantee to inform their customers personally of any changes in their savings rates. And if you ask me, that’s simply outrageous!

The villains

So who are the worst offenders?

The list below highlights the seven banks/building societies that, according to Which? Money, won’t guarantee you’ll be personally informed of any rate changes - unless the rate cut is more than 0.25% or if a series of smaller cuts add up to more than 0.5% over a year.

• Bank of Scotland
• Halifax
• HSBC
• Lloyds TSB
• Nationwide
• NatWest/RBS
• Santander

So if you have your savings account with any of these lenders, don’t automatically assume you’ll be told that the interest rate on your account is changing, especially if the rate cut is less than 0.25%.

Granted, you could argue that a rate cut of this size isn’t huge, so does it really matter if you don’t know about it? But I would argue that at a time when interest rates are at an historical low, any change in your savings rate, no matter how small, is important – particularly, if you’re after the best deal.

To make things more confusing, the Which? Money research also revealed that Bank of Scotland, Halifax and HSBC may or may not personally notify their customers of smaller rate cuts. And Nationwide is even worse as it makes no commitment in its terms and conditions to personally inform its customers of changes to interest rates – no matter how large the cut may be.

All of the above lenders prefer to inform their customers by informal methods – such as in branch, in the newspaper or on their website. And that means it’s far more inconvenient to you the customer. After all, unless you regularly keep an eye out for such notifications, there’s a good chance you’ll be none the wiser. And I don’t know about you, but I’m not going to keep popping into my local branch just to make sure I haven’t missed anything.

The heroes

So which banks and building societies have had the decency to say they will notify their customers of rate changes – even when they are cut by less than 0.25% and no more than 0.5% in a year?

Well, if you bank with Cheltenham & Gloucester, First Direct, Co-op, ING Direct or Barclays, you’ll be pleased to know that all five say they send out an email or letter to inform their customers of any rate changes on their savings accounts. So gold stars all round.

The trouble is, they sometimes include this information in an envelope that contains marketing material where they are trying to sell you a new product. So be careful not to classify it as junk.

Don’t put up with rubbish rates

So now we know which banks can be trusted and which can’t, if you’ve discovered that you bank with one of the villains in this story, it might be time to think about switching to a different provider.

That said, even if your bank is trustworthy, you might still be getting a rubbish interest rate on your savings. It's easy to keep an eye on your savings rate yourself, so if you discover you're not satisfied with the interest rate you’re currently receiving on your savings, switch to a better account.

The chart below highlights eight of the top easy access savings accounts on the market right now. 

So, as you can see, there are plenty of savings accounts out there to choose from. Admittedly, they may not look like the best rates ever, but they are the best you’re going to get right now!

And fortunately, ING Direct, one of the few lenders which do promise to personally inform its customers of any interest rate changes, features pretty highly on the list, with its Savings Account offering a competitive interest rate of 2.75%.

That said, you’re not going to need to worry about the interest rate changing on this account for the first year, because the 2.75% is guaranteed for 12 months. After that period, the interest rate drops to a pitiful 0.50% - meaning you will need to hunt out a more competitive savings account.

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It’s worth bearing in mind that all but one of the accounts in the above chart have interest rates which drop significantly after the first year - so make sure you're prepared to switch again. The only account that doesn’t is the Halifax Web Saver Extra.

However, the drawback to the Halifax Web Saver Extra is that the interest rate is variable, so it could change at any time – and don’t forget, Halifax doesn’t guarantee to inform its customers of any rate changes unless the rate cut is more than 0.25%. What’s more, if you’re not a Halifax current account customer, the interest rate of 2.60% is not as competitive as the 2.75% offered by ING.

So overall, the moral of this story is to always keep an eye on your savings rates to ensure rate changes don’t pass you by. And if this seems like a lot of hassle, make sure you switch to a lender you can trust – ie, Cheltenham & Gloucester, First Direct, Co-op, ING Direct or Barclays!

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