Mad as hell? Want to get one over on your bank?
Published 25/05/2014 | 02:30
WANT to get one over on your bank? Well, believe it or not, there is a product where the bank pays you and it is a generous amount at that. Oh, and the bank loses money on this product.
For the last two years now, banks have been cutting the interest rate they will pay on lump sums and amounts left in instant access accounts.
Permanent TSB and AIB are just the latest to slash what they will pay savers.
The big banks are now paying pitiable interest rates. This is particularly the case with instant access accounts, also known as demand deposit accounts.
Ulster Bank pays as little as 0.25 per cent on its eSavings instant account.
AIB pays just 0.05 per cent on its instant access account, called Demand Deposit account.
The Bank of Ireland version pays 0.01 per cent. That means that you would get just €5 interest on €50,000 over a year. And that is before DIRT tax of 41 per cent leaves you with less than €3.
Of course, banks will offer you much better rates if you are prepared to tie your funds into long-term savings accounts.
But if you really want to get the better of your bank, you need to have a regular savings account.
These monthly saver options pay interest rates as high as 4 per cent. Little wonder then that banks lose money on them.
These accounts are loss leaders – the idea is to get people into the savings habit and hope that they will take out other products.
On the downside, there will usually be a limit on the amount you can put in and the amount that you can have as a total deposit, according to Simon Moynihan of price comparison site Bonkers.ie.
What that means is that these types of accounts take a little bit of work if you want to come out a winner.
Nationwide UK (Ireland) offers 4 per cent annual equivalent rate. You must put at least €100 into the account every month and no more than €1,000 a month.
You can get instant access to your savings, but the account can only be operated online.
However, the term of the account is for just 15 months and if the balance exceeds €15,265 then the rate falls to just 1.05 per cent.
KBC Bank offers 3.5 per cent. This one has a maximum balance of €50,000. The disadvantage is that you can only take two payment breaks a year.
AIB's online saver account offers 2.75 per cent, with Permanent TSB offering 2.7 per cent, and Ulster paying 2.25 per cent.
Of course, you have to factor in 41 per cent DIRT tax when you consider your return.
But at least with regular saver accounts the banks lose.
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