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 don't be fooled by the exclusivity, as our research shows that these deals don't necessarily offer the best rates on the market.
After analysing the products that are only available to customers who hold existing accounts with the provider, we found that they would actually be far better off shopping around. In some cases, those who opt for a loyalty account could be as much as 0.90% worse off, something that's clearly illustrated in the table below:
As you can see, you shouldn't automatically assume that loyalty pays. What may appear to be a good deal at first glance may be nothing of the sort, but providers bank on your loyalty – and even apathy – in the hope they can entice you in. Don't let them!
"Loyalty accounts are a great way for providers to keep hold of their existing customers," said Charlotte Nelson, finance expert at Moneyfacts. "They offer exclusive deals with better rates than their regular products, which make savers think that they're 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."
That kind of difference could quickly add up, and if you've got an even bigger savings pot, you could lose out on even more interest if you don't shop around. It may seem like an inconvenience – 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 – but as Charlotte points out, "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," she added. "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."
Don't be stuck with a poor rate – compare savings accounts and see if you can find a better deal
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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