Banks Punish Customers With Zero Interest
- Number of current accounts paying no interest at all doubles since Lehman Brothers collapse in September 2008.
- One in five accounts now donít pay interest.
Banks and building societies have more than doubled the number of current accounts paying no interest at all in the past nine months, according to MoneyExpert.com*.
The independent financial comparison website says the number of current accounts on the market paying zero per cent AER has more than doubled since the definitive moment of the credit crunch last year ñ the collapse of Lehman Brothers in September.
In September last year just 16 accounts ñ around nine per cent of the total market ñ did not pay interest on positive balances. However that number has since risen to 40 accounts now, representing 22 per cent of the market ñ one in five.
And MoneyExpert.comís startling research also shows that an incredible 122 accounts ñ over 68 per cent of the entire current account market ñ pays under the current Bank of England base rate of 0.5 per cent.
Pierre Williams, Head of Research at MoneyExpert.com, said: ìThe banks are hurting badly but itís their customers who are paying the price. People may not even realise that their terms and conditions have changed. Any account paying under two per cent in interest isnít worth considering ñ people are bound to start voting with their feet if banks persist in being so miserly.”
In June this year HSBC dealt a blow to its packaged account customers by announcing it would not pay them interest on the current account. And in December last year Nationwide Building Society stopped paying interest to its Flex Account customers ñ unless they had a balance of at least £1,500.
Since the collapse of Lehman Brothers in September 2008 the Bank of England base rate has fallen from 5 per cent to a historic low of just 0.5 per cent in March this year, leaving banks and building societies with little hope of paying customers the returns they had enjoyed for decades.
However MoneyExpert.com warns that many banks and building societies are now so tightly controlled that many will pay customers even less than the base rate as part of ongoing efforts to improve margins and recoup losses.
Pierre Williams added: ìNot so long ago we were all wondering whether we were about to see the death of free banking. Well now of more concern is whether banks can guarantee its customers any return at all on their cash.
ìThe good news is that there are competitive deals out there. Some current accounts pay over three per cent ñ though most come with a variety of conditions. Anyone with a zero-interest current account should be looking elsewhere.”