Chorley Building Society this week launched an ‘easy-access’ account paying a market-leading rate of 5.3 per cent.
But there is a big catch – savers opening this account will be limited to just one withdrawal every 12 months, making it the most strict ‘easy’ access product This is Money has ever reported on.
Some of the very best easy-access deals launched recently have come with this caveat, whether it is one, two or three withdrawal limits.
Coventry Building Society launched an easy-access account paying a top rate of 5.2 per cent, but savers can only make three withdrawals in a 12 month period – although, that looks generous compared to Chorley.
Providers have been launching top market-leading easy-access deals but imposing withdrawal restrictions, locking some savers out of these deals
Savers who need to access their cash more frequently are locked out of some of the best easy-access deals on the market as a result.
Easy-access Isas have followed this trend, with some of the best accounts being subject to some form of withdrawal restriction or bonus element built in.
For example, Coventry Building Society’s four access Isa which pays a rate of 5.05 per cent and Skipton Building Society’s cash Isa which pays 5 per cent interest.
There are no specific rules as to what qualifies as ‘easy-access’. So long as an account offers at least one withdrawal it can be considered an easy-access account.
James Blower, founder of Savings Guru says: ‘The rules were really around what constitutes an “instant access” account. This used to mean that you could get your money instantly by going and withdrawing it in cash.
‘So new banks adopted names like easy access, no notice etc to get around this.
‘The term “easy access” used now is mainly by comparison sites to group all these various accounts in to one group so they can be compared.’
Why are providers doing this?
Many savers see providers launching best buy easy-access accounts but putting restrictions on the number of withdrawals they can make as just another way to grab savers’ cash and hold onto it.
Blower says: ‘The banks at the top of the tables on easy-access are trying to attract customers who don’t access their money too often.
‘They are offering higher rates but restricting access in the hope of attracting savers who will just put their money in but not touch it very often or at all.
Asked whether providers are trying to hold onto savers’ money by applying withdrawal limits to easy-access accounts, Blower says: ‘Yes. Chorley and Coventry are looking for people who are going to deposit a lump sum, that they want to keep access to, but who will largely leave it alone. They don’t want people who are moving money in and out regularly.’
While Andrew Hagger, founder of MoneyComms says: ‘By limiting the withdrawals it makes the money more sticky, i.e. less likely for the account to be drained of funds in a single swoop.
‘The providers are prepared to pay an enhanced rate for this stickiness as it is easier for them to control their wider savings book.’
‘Just one step away from a fixed rate bond’
In the case of Chorley Building Society’s 5.3 per cent easy-access account, where only one withdrawal is allowed every 12 months, this shares more in common with a fixed rate account than an easy-access account. So why not fix up for one year and get a better rate?
Hagger says: ‘It’s difficult to justify why a one withdrawal account should be classed as easy-access – it could be seen as just one step away from a fixed rate bond.
At the moment, the best one year-fixed rate bond pays 6.11 per cent interest and is offered by Union Bank of India.
Blower advises: ‘I think the key thing savers should consider here is ‘might I want to access my money?’ If the answer is ‘maybe’, the Union Bank of India account won’t allow it.
‘But this is a big rate trade off so I would tell savers to think hard about access – if they might want it, then keep some money in an easy-access account.
‘If they have, say, £20,000, then putting £10,000 Ulster Bank’s easy-access account paying 5.2 per cent with no restrictions and £10,000 in Union Bank for one year will give a return of 5.65 per cent, but this way they can access half of their money.’
What do savings experts think of it?
Savings Guru does not list single access accounts on its easy-access best buy list.
Blower says: ‘We believe these are being used to gain position on tables and are not a true easy access account.
‘We do include those with two or more withdrawals – we didn’t at one point but found some savers wanted them and were prepared to trade off access for a higher rate.’
Andrew Hagger is slightly more relaxed where three or four withdrawals are permitted but he says: ‘Even these are a little questionable if you want to compare apples with apples – but both products reward the customer with market leading rates.
‘In my own tables I do feature the Coventry easy-access and Isa accounts, as the titles of the accounts make it crystal clear of the limitations.
‘The first thing is it must be plain from the account title that there are limit restrictions and to be fair I think most examples do this.
‘It also depends how a particular saver uses their money – they may have a cash savings portfolio consisting of a fixed rate bond, a totally non restricted easy access account and a limited access account – just to eek out some extra interest even though flexibility is questionable.’
This is Money contacted Chorley Building Society for comment.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
