Savings: don't be fooled by introductory bonuses

Plummeting rates meant savers finished 2012 wondering where to put their money, and 2013 is shaping up to be no different as banks cut introductory offers in another blow to savers.

According to comparison site Moneyfacts.co.uk, not only are savers being made to suffer low rates but there are now few savings accounts that even offer introductory rates.

Introductory rates are enhanced rates offered by banks and building societies to try and lure in customers. This boosted rate usually lasts for a period of six months or a year, and after that the rate reduces but the bank or building society hopes you will keep your money with them anyway.

Over the past three years the number of accounts offering a bonus has fallen dramatically. In January 2011 there were 541 easy access accounts on the market and 101 offered an introductory bonus, the highest of which was 3%.

Today, although there are 416 easy access savings accounts still on offer there are only 46 offering introductory bonuses and the highest bonus you can get is 2%.

There are no easy access accounts that beat inflation, currently at 2.7%, but if you can’t lock your money away and need instant access you will be better off ditching accounts with bonus rates altogether.

The best rate currently being offered on an easy access account is 2.3% in the form of the West Bromwich Building Society WeBSave Plus 3, which offers no introductory bonus. This rate is only available online but West Brom offers a Branch Easy Access Saver account at a slight reduced rate of 2.26% which you can get in branch.

However, both these rates beat the best deal offering a bonus. The Post Office Instant Saver offers a rate of 2.1%, which includes the 2% bonus for 12 months.

Notice account no better

Accounts where you have to give notice to take your money out have fared even worse when it comes to introductory bonuses.

Moneyfacts research shows in January 2011 there were 264 notice accounts on the market and 35 of them offered a bonus – the highest bonus being 2.12%.

Today the number of accounts has shrunk to 212 and just 11 have bonuses, with the highest bonus offered being the pitifully low 1.25%.

Principality Building Society is offering the best notice account. The Principality Promise Saver offers a rate of 2.3%, 0.8% of which is a bonus for 12 months. The minimum investment is £500 and 30 days’ notice must be given to withdraw money.