High Interest Savings Accounts
May 19th, 2008 by Jason
As the “credit crunch” continues to bite, and the daily news carries stories of apparently wealthy, middle class professionals turning to debt advisor’s in their droves, we are surrounded by advertising from all manner of financial institutions asking us to hand over our money.
The four banks that come most readily to mind are Halifax, ING Direct, Kaupthing Edge and IceSave. Halifax are now using their successful television advertising with a savings focus . To tell the truth I find their TV spots great for brand awareness but I can’t remember the specifics of the ads and would have to seek detail elsewhere.
The other three are really pushing savings accounts; Kaupthing Edge, whose high interest savings accounts deliver the best interest rates in the UK, has maintained it’s rates even after the bank of England dropped theirs and states they will remain 0.3% over the BoE base rate until 2012. Their advertising in the UK seems targeted to glossy supplements and magazines and have a clear focus - we offer the best deal.
ING Direct has some high profile television advertising highlighting all their products, and they are pleasant to the senses, as opposed to the slightly jarring Halifax commercials. Their adverts portray their brand as simple and develop trust consumer.
There is a clear winner in mindshare, though to a very small demographic (people using my local station), which is the outside display ad for IceSave which is directly in front of me as I walk to the station each morning. I’ll try and add a picture.
So here’s the thing - the media tells us there is a credit crunch and everyone is falling into debt because of ‘cost of living’ type price increases and at the same time, the banks are asking us to give them our spare cash! How does that work out?
It seems that along with the paradox that only people with money are allowed to borrow - now only people with money are allowed to benefit from the best savings rates.
So why are the banks suddenly keen to reward us with interest rates reminiscent of the late eighties/early nineties? How do the banks make their money - from mortgages and interest on car loans and credit cards… not likely, that’s only pocket change. They need your money because they use it to play on the futures markets to make the big money. If they start getting too many debts and defaults this reduces the amount of money (a multiple of their assets) that they are allowed to play with on the futures markets. To keep their hand in the game they need to get some hard cash in the vault and minimize their risks.
If you have spare cash, and can afford to save, now is the time to get the best savings deals but from my own research I would suggest not putting more than the government guaranteed £35000 in any one account - unless you are banking with one of the truly international banks like HSBC.