Savers warned to check ‘easy access account’ terms carefully
Take the current top paying account in the ‘easy access’ category – the Coventry Building Society Limited Access Saver. It pays an attractive 1.40% and sits firmly within Coventry’s ‘easy access’ savings which it describes as ‘simple, flexible and straightforward’.
But as the product name suggests, there are restrictions to the number of times you can withdraw your cash without incurring a penalty. In this case, the limit is three per year.
In comparison, it’s truly easy access account pays 1.25%, 0.15% less than the limited access saver.
Easy access accounts are different to notice accounts, which tie up your cash for a certain period of time and offer higher rates because providers have a better sense of how long they will have your money on their books.
Easy access accounts are flexible and allow customers access to their funds without giving notice.
Around £724bn is currently sitting in easy access products – accounting for 81% of the market.
‘Be clear on the terms and conditions of the account’
With competition in this space heating up, some providers are adding withdrawal restrictions to sustain the top rates, according to Rachel Springall, finance expert at data site Moneyfacts.
This may seem at odds with the nature of easy access accounts, but Springall says that until the category is redefined, these accounts will still fall under the easy access definition, which it applies for its best buy tables within this category.
“Savers need to look very carefully at the limitations of any account and consider them when searching for a best buy deal so that they are not disappointed,” she says.
Deciding between a true easy access account and one that has withdrawal restrictions comes down to how much access you’ll need to your cash.
Springall adds: “Savers opting for 1.40% with Coventry BS are limited to three penalty-free withdrawals and further withdrawals will be subject to a 50 day loss of interest. In comparison, Birmingham Midshires pays 1.35% and allows unlimited withdrawals, so for 0.05% less, savers will be safe in the knowledge that no penalties will occur should they move money out of their account on multiple occasions.”
Tom Adams, head of research at independent savings advice site, Savings Champion, says on the face of it, so-called easy access accounts that restrict access to your money could be seen as a potential trap for unwary savers.
“However, if you are very clear on the terms and conditions of the account, this type of account can be used to your advantage if the rate paid is better than other less restrictive options.
“It very much depends on how you will use the account and how high the rate is. If you know you won’t need regular access to the money, these accounts are worth considering, whereas if you will need more regular access, then you would be better off looking elsewhere. As with any account, you should go in with your eyes wide open to make sure you don’t fall foul of the rules,” he says.
No formal definition of ‘easy access’
According to the financial regulator, the Financial Conduct Authority (FCA), there isn’t a formal definition of ‘easy access’.
But its Cash Savings Market Study describes easy access accounts as having few or no restrictions on making additional deposits or withdrawals.
“These accounts include instant access accounts and no-notice accounts. Easy access accounts usually offer a variable rate of interest (which means the provider may vary the interest rate by as much as it wishes) and an unlimited term. They may also offer a time-limited introductory bonus interest rate or a preferential interest rate to certain groups of customers that qualify for it,” the study states.
The FCA says that firms must treat their customers fairly and communicate information in a way that is “clear, fair and not misleading”.
“We investigate complaints about misleading, unclear or unfair financial adverts and promotions so if there are concerns about a specific promotion in relation to a savings product, you can complain here,” a spokesperson said.
A further code of conduct for advertising interest bearing accounts doesn’t include anything on easy access, but there is guidance on the use of the term ‘instant access’. Here, firms’ wording should only be used where it’s possible to make cash withdrawals without charge, or to a side or nominated account.
But the guidance also states that a product may be termed instant access where the number of withdrawals is limited for “good reason”.
“For example, it would be within the spirit to limit withdrawals on a savings account to ensure it was not used as a money transmission account, but would not be appropriate to limit withdrawals too tightly”, the guidance states. Any restrictions or charges must be included in the main part of the advert and not in supporting text.
The FCA adds that in 2015, new rules were introduction requiring a summary box for savings accounts to “enhance consumer understanding and awareness of particular aspects of savings products through the provision of key product information”.
This includes an explanation where different rates apply if conditions apply, such as where a customer makes a withdrawal.