Nationwide savings account too good to be true?

Zillah

http://www.nationwideuk.ie/savings/regularsaveraccount.asp

They're offering 4% AER on a 15 month savings account, which is several times higher than anyone else seems to be offering - and is also much higher than any of their other accounts. Am I missing something?

- Starting balance 100-1000
- Monthly lodgements 100-1000
- Can make two unpenalised withdrawals per year
- Interest paid once per year and at the completion of the 15 month term

If you compare it to their own 24 month fixed sum account, for example:
http://www.nationwideuk.ie/savings/24monthfixedrateaccount.asp

They're only offering 1.3% on up to 2 million!

I just don't understand why one offer would be so good, and if I don't understand it I am paranoid I am missing something I might regret later.

(Additionally, I was wondering if anyone knows, as I can't see it in the terms: can I pick and choose how much to lodge each month or do I have to commit to a certain sum for the duration?)

EITS

I rang up their customer services on Friday and asked the same questions, I was told by the rep that you can deposit anything between 100-1000, its not limited to the same amount every month. Also, there's no penalty for missing a month, other than the potential interest you'd be missing out on, as they kept mentioning.

Zillah

Which is awesome, and makes me even more paranoid that I have to be missing something!

Humour Me

Had this account myself until earlier this year. It was perfect for my needs, I was able to transfer as much as I wanted each month, there were no issues with changing the amounts.

Customer service was excellent, I changed current account and address during the savings period, when I notified them of the changes, I had a letter in a week confirming they were done.

My only issue is that you can only take out the account once. When the 15 months are up you cannot open another account, it would have been nice to get 4% for another 15 months.

Zillah

Gosh that's weird. Maybe they're just doing it to lure in new customers, and that's why they're willing to offer such a great rate once-off?

km79

Had a savings/college fund account for my son with aib and the interest rate is pathetic
This will do just fine for 15 months !
Thanks OP !

Humour Me

As far as I know they only have 1 branch in the country and then their back office operations so they don't have the same level of costs as the banks with big branch networks. Its probably one of the reasons they can give such a good rate.

Also just to note that the 4% is not guaranteed, it is a variable rate so they do have the option to reduce the rate. But it has been 4% for over two years now so I can't imagine it will change in the short term.

JTL

This looks excellent. Will make an application on Monday. In the process of building up my savings so every extra cent of interest helps.

JTMan

Zillah wrote: »

I just don't understand why one offer would be so good,

Loss making promo to get more people to start opening accounts with Nationwide UK (Ireland). It is a loss leader to lure people into their other products.

Nationwide UK (Ireland) are effectively paying up to around 200 EUR per customer to buy new customers via an interest rate promotion.

NIMAN

So is this like the credit card offers, getting a good rate for a limited time?

4% is of course great, but after the time is up, what rate do you get from it? I'm guessing it a poor return then, but they have you as a customer who might stick with them for years to come. Result for them.

omerin

The catch is that it's variable. Anyone who has the PTSB will know that the rate will only go one way and that's down. PTSB rates - 2.5% in Feb 2015 to 1.75% in May 2015 to 1.4% in July 2015.

Zillah

omerin wrote: »

The catch is that it's variable. Anyone who has the PTSB will know that the rate will only go one way and that's down. PTSB rates - 2.5% in Feb 2015 to 1.75% in May 2015 to 1.4% in July 2015.

It's only a hypothetical catch though, because they have actually been paying it out quite consistently.

homer911

Its fine for someone with no lump sum who wants to save up to €1,000 for up to 15 months, after that its no better than other offerings

They rely on saver intransigence at the end of the 15 month period, after which you get a very poor rate

Also to be aware that on average you only have half the deposit earning interest for the 15 months, or to put it another way, half the rate on the total deposit in that period, so an equivalent of 2% AER, before DIRT - if you work out what that actually means in terms of Euro, an average balance of 7500 over 15 months would earn you roughly €220 after DIRT at current rates. The difference you are actually making between that any other account in real terms is not very much, and thats assuming you invest the maximum

coylemj

homer911 wrote: »

Also to be aware that on average you only have half the deposit earning interest for the 15 months, or to put it another way, half the rate on the total deposit in that period, so an equivalent of 2% AER, before DIRT - if you work out what that actually means in terms of Euro, an average balance of 7500 over 15 months would earn you roughly €220 after DIRT at current rates. The difference you are actually making between that any other account in real terms is not very much, and thats assuming you invest the maximum

+1 If I invested €1,000 p.m. from Aug 1st next for 15 months, I'd end up with €235 interest after DIRT. Hardly worth the bother.

JTMan

coylemj wrote: »

I'd end up with €235 interest after DIRT. Hardly worth the bother.

Well worth the bother. That kind of cash would pay your water bill etc etc

Better to get a small return then no return in zero rated current account.

homer911

JTMan wrote: »

Well worth the bother. That kind of cash would pay your water bill etc etc

Better to get a small return then no return in zero rated current account.

Who builds up savings of €15k and leaves it in a current account?

Zillah

homer911 wrote: »

Its fine for someone with no lump sum who wants to save up to €1,000 for up to 15 months, after that its no better than other offerings

They rely on saver intransigence at the end of the 15 month period, after which you get a very poor rate

Also to be aware that on average you only have half the deposit earning interest for the 15 months, or to put it another way, half the rate on the total deposit in that period, so an equivalent of 2% AER, before DIRT - if you work out what that actually means in terms of Euro, an average balance of 7500 over 15 months would earn you roughly €220 after DIRT at current rates. The difference you are actually making between that any other account in real terms is not very much, and thats assuming you invest the maximum

So...you should use one of the other slightly worse options? What exactly is your point? No one claimed you can get one of these accounts and retire on it.

28064212

Zillah wrote: »

If you compare it to their own 24 month fixed sum account, for example:
http://www.nationwideuk.ie/savings/24monthfixedrateaccount.asp

They're only offering 1.3% on up to 2 million!

I just don't understand why one offer would be so good

You're not comparing like with like. The 4% is great if you have a small/no lump sum, and plan to make regular monthly savings for 15 months. If you already have a large lump sum, the regular account is useless. Also, as already noted, Nationwide can decide to reduce the interest rate to nothing if they choose. They can't do that with the fixed rate.

It's also worth noting that you can only ever open one Nationwide Regular Account. After the 15 months, you can't just close it and open another one. By comparison, the KBC Regular Saver (3%) has no end date and has a maximum value of €50,000. So while Nationwide will out-perform it over 15 months, by 18 months, KBC will have earned more interest, and still has room to grow

Zillah

KBC is on standing order for a set amount though, whereas Nationwide allows you to choose how much to put in each month, according to Humour Me earlier in the thread.

So I could dump 1k into Nationwide every month for the first however many months to get the lump sum up, and then reduce it to a regular deposit. Sounds like with KBC I commit to a set standing order, so it would take forever to get the balance up, because I can't do 1k every month for 15 months in a row (or however long, is the standing order set until the account is closed?).

28064212

Zillah wrote: »

KBC is on standing order for a set amount though, whereas Nationwide allows you to choose how much to put in each month, according to Humour Me earlier in the thread.

So I could dump 1k into Nationwide every month for the first however many months to get the lump sum up, and then reduce it to a regular deposit. Sounds like with KBC I commit to a set standing order, so it would take forever to get the balance up, because I can't do 1k every month for 15 months in a row (or however long, is the standing order set until the account is closed?).

The KBC standing order amount can be changed, but only in writing, and with a minimum of 14 days notice, so the Nationwide is more flexible in that regard

Zillah

Hmm. So I could do 1k, for say, six or seven months, and then reduce it to something more sustainable thereafter?

I do like the idea of leaving it going indefinitely rather than having to work out a new plan in 15 months.

gouche

KBC seem to be offering a 1% interest bonus - bringing up to 4%gross/AER at the minute.

28064212

gouche wrote: »

KBC seem to be offering a 1% interest bonus - bringing up to 4%gross/AER at the minute.

You need a KBC current account for the bonus, which incurs fees of €24 a year

Zillah

Sounds like a hell of a headache for the sake of an extra 1%. A 1% which they also say could be cancelled at any time.

JTMan

homer911 wrote: »

Who builds up savings of €15k and leaves it in a current account?

Plenty of idiots. The AIB and BoI financial statements clearly show a big growing trend towards people simply leaving their savings in their current account rather than using a savings account. A third of BoI deposits are in current accounts.

Humour Me

Zillah, since you mentioned the KBC account I thought I might give you my feedback on it since I have that account too!

I had the Nationwide and KBC accounts running at the same time. My aim was to maximise the return I was getting for my savings and they were the best accounts available at the time.

The KBC account was very easy to set up. I have made a few changes to the amounts being saved since I opened it and have had no issues. I dont have online access set up but I understand from a friend that it is really poor. This might have improved since they set up the current accounts. Also if you want to withdraw any money you need to send a letter requesting a transfer to your account or a cheque which can be a problem if you want to get access quickly.

I think it comes down to what you are saving for. For me the Nationwide account was a way to build up a lump sum over 15 months so I now have an emergency fund and the money to help pay for the course im doing. I tried to maximise the amount I put in each month, knowing that I had big expenses coming up this year and the more I saved the better off I would be. Knowing the end date really helped me to focus on saving.

I am treating the KBC account as a way to slowly build up a lump sum, maybe as a deposit. I reckon Im at least 5 years out from even considering buying a house, maybe even longer if I go abroad again. But the money is collected from my account 2 days after payday so I dont even miss the amount and it can slowly build up without me needing to do anything.