Good news on the interest rate front for a change

Business banking news review: week ending 24 Oct 2013

Interest rates on personal and business bank accounts have been abysmal lately, but there are some relatively decent deals if you know where to look.

For instance, news broke this week how you can actually find not one but two banks offering current accounts with a 4 per cent rate of return. Both lenders, National Australia Bank Group members Yorkshire and Clydesdale Banks, will offer you an inflation-busting interest rate on balances under £3,000 for a year and a half; from March of 2015 the current accounts both drop to a modest 2 per cent rate.

 

Of course there’s a catch. When is there not? But still it’s not terrible; in order to qualify for the earned interest you need to make a minimum of £1,000 worth of deposits into your current account every month. If you’re serious about growing your cash, my mum always told me that it’s always better to make hay when the sun shines.

There are some other banks offering other high-interest savings products, though none can touch the 4 per cent current account deal. In fact, the new best buy three year fixed rate bond, just launched by Secure Trust Bank, offers a rather anaemic 2.61 per cent rate of return – and that’s before tax is taken into account!

Look, I’m not saying that you should or shouldn’t go with a particular lender when it comes to your plans for growing your savings pots, but choosing a ‘deal’ like the Secure Trust Bank offering is a terrible gamble. First of all, with a three-year fix you’re locking up your cash for 36 very long months, and unless the UK inflation rate comes down by a massive margin the money you put in today will be worth functionally less than it will be three years from now.

Erosion affects more than cliffs and beaches, after all – when you’re pulling in less money in interest than the rate at which cost of living is increasing, you’re not really doing very well for yourself. Honestly you’d be better off going with the 4 per cent current account because at least the after-tax rate of return there is above the current inflation rate!

It’s just a bad idea to do otherwise, unless you’re some sort of time traveler from the future and you’ve got insider information that the rest of us don’t. Of course if you really were from the future, what are you doing reading this? Shouldn’t you be off trying to find plutonium for your DeLorean’s flux capacitor?

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