Those that opened up savings accounts 12 months ago have been warned that the bonus rates on many of these products are soon to expire, if they haven’t already.
Many savers may find it necessary to switch to a new product with a more attractive interest rate after the current introductory bonus on their account runs its course. This is due to the removal of bonus rates which leave their formerly competitive account with sometimes abysmally low interest rates.
In March 2010 Birmingham Midshires announced the launch of its Telephone Extra 2 saver which paid interest before tax of 2.75 per cent. However 2.25 per cent of that rate was a bonus rate that expired after one year, which has left savers with a paltry 0.5 per cent savings rate.
This represents a serious drop in interest over the course of the next year. On an average £10,000 savings, the after tax interest drops from £220 down to a highly inadequate £40.
The personal and business bank account provider’s original Telephone Extra has also had its rates slashed severely as well with the expiration of its bonus rate. However Birmingham Midshires will allow savers to switch to the third iteration of the savings product, which will offer a 2.6 per cent rate of return on its first 12 months, thanks to its own bonus rate.
Savers with Issue 3 of AA’s Internet Extra account will likewise see 2.3 percentage points of their 2.8 per cent total rate vanish into thin air with the bonus rate running its course. This will also drop the paid interest on a £10,000 account down to only £40 a year, compared to its previous £184. Again savers that took out Issues 1 and 2 of the Internet Extra account are currently being paid the greatly reduced rate as well.
Finally, Santander-owned Alliance & Leicester saw their online banking Saver 6 drop its rates to 0.5 per cent, down from 2.75 per cent.