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Does loyalty pay in the savings market?

Does loyalty pay in the savings market?

Category: Savings

Updated: 23/02/2015
First Published: 23/02/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Loyalty products are marketed as exclusive deals that are only available to existing account holders, often touted as offering better rates than their standard, open-to-all counterparts. But are they the better option, or are they just smoke and mirrors?

Moneyfacts has analysed those savings products that are only available to consumers who hold existing accounts with a specific provider, and the results are in. While these deals may pay a higher rate than the other accounts offered by that provider, in all cases, better deals can be found by shopping around. The evidence shows that loyalty really doesn't pay.

As an added blow to customers who thought they were getting a good deal, the research also shows that, as savings rates have fallen, the gap between loyalty (or linked) products and restriction-free accounts has worsened to a greater extent than standard savings rates. The table below highlights this in more detail, and as you can see, it isn't great news.

Easy Access Today Feb-14 Variable Cash ISAs Today Feb-14
Best Rate (linked products only) 1.00% 1.40% Best Rate (linked products only) 1.59% 1.75%
Best Rate excluding linked products 1.50% 1.60% Best Rate excluding linked products 2.00% 1.80%
Difference between linked and non-linked best acc -0.50% -0.20% Difference between linked and non-linked best acc -0.41% -0.05%
Two-Year Fixed Rates Today Feb-14 Five-Year Fixed Rates Today Feb-14
Best Rate (linked products only) 1.90% 2.40% Best Rate (linked products only) 3.00% 2.50%
Best Rate excluding linked products 2.30% 2.31% Best Rate excluding linked products 3.53% 3.36%
Difference between linked and non-linked best acc -0.40% 0.09% Difference between linked and non-linked best acc -0.53% -0.86%
Source: www.moneyfacts.co.uk

"It is obvious that a bank or building society is going to try to keep hold of its customer base even if that means offering them exclusive deals at better rates," said Sylvia Waycot, editor of Moneyfacts.co.uk. "In principle, this has to be good news for the consumer, but the truth is that it can only ever be good news if the consumer ends up with a deal that can't be beaten.

"The truth is that after examining all of the loyalty accounts across today's market, not one of them beats the best rate equivalent. In all cases, taking a loyalty account from a national or online provider will lose you money."

So, the message is: don't be drawn in. Providers may make it difficult with names such as Exclusive, Prestige, Bonus, Loyalty and Premier, but as Ms. Waycot says, "providers' ability to 'play on the apathy' of consumers can only continue as long as consumers walk without thought into these accounts.

"Putting convenience over return is acceptable if that is what, as the consumer, you have decided to do, but it should never be the starting point. Having assessed the market, today's loyalty accounts are not offering any reward, so don't be afraid to invest your loyalty elsewhere."

Information & Rates correct as at: 23.02.2015

What next?

Find the accounts that really do deserve your loyalty. Check out our best buys.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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