UK Savers Loyalty Doesn’t Pay

By: MoneyFacts

Loyalty savings products are often marketed as exclusive deals that are only available to the select few who hold the right products. If you fit the criteria, this can be a tempting offer, but these deals don’t necessarily offer the best rates on the market.

Moneyfacts.co.uk analysed products that are only available to customers who hold existing accounts with the provider and found that they would actually be better off shopping around, something that is clearly illustrated in the table below.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:        

“Loyalty accounts are a great way for providers to keep hold of their existing customers. They offer exclusive deals with better rates than their regular products, which make savers think that they are getting a good deal. However, these products are only worthwhile if they can’t be beaten elsewhere.

“In reality these so-called loyalty deals are not a great option as they often don’t pay as much as other accounts on the open market. For example, the difference in rate between the best two-year fixed deal and the best loyalty account version stands at a significant 0.90%. This means that a saver investing £5,000 in the loyalty deal would be £45 a year worse off in terms of savings interest than if they had invested in the open market account.

“Savings linked to current accounts remove the hassle of moving money to and from different accounts, which is why many prefer to have a savings account with their main provider. However, savers need to be careful as they could end up stuck with shockingly low interest rates.

“As savings rates are currently low, it’s hard for savers to muster up the willpower to switch savings deals, but this lethargy is being used to providers’ advantage and is resulting in even more poor-paying deals. Savers therefore need to vote with their feet and get past the misconception that ‘exclusive’ loyalty deals mean the best rate. Instead, they should try to shop around to prevent their money from languishing in an inferior account.”  

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