A&L hikes start-up deposit on savings account
Alliance & Leicester whipped its competitive Online Saver account out of reach for many regular savers today, hiking the minimum start-up deposit from £1 to a massive £1,000.
The Santander-owned bank launched its Online Saver issue five account last month, paying a sizeable 3.15%, including a tiered 12-month bonus from 2.65% to 1.65% bonus depending on the balance.
The account became the best internet-only instant access account on the market - requiring a minimum deposit of just £1 with unlimited, penalty-free withdrawals.
Alliance & Leicester spokeswoman, Siobhan O'Shea, said the increase in the start-up deposit to £1,000 will "encourage people to save more", but it could in fact alienate those without a large lump sum who want to start saving and earn a good rate.
Michelle Slade, a spokeswoman from independent comparison website Moneyfacts, says: "Many banks are increasingly looking to their savings books rather than the money markets to fund their lending activities.
"It is likely that A&L is trying to tempt those with larger balances rather than those just hoping to put a few hundred pounds aside."
For savers with less than £1,000 to open an account, the Telephone Extra Account from Birmingham Midshires also pays a competitive 3.15% on deposits from £1. This deal allows unlimited and penalty-free withdrawals, but access is restricted to telephone banking. The rate also includes a bonus of 2.65% for the first 12 months.
Consumers need to keep on their toes to avoid being stung by strict account conditions and bonus rates.
Banks and building societies have been using bonuses more and more over recent months to offer temporary rate increases to savers. The percentage of variable rate savings accounts including a bonus has increased from 10.8% to 16.4% over the past two years, according to Moneyfacts, while the size of the average bonus has nearly doubled from 0.64% to 1.10%.
"While this can provide short-term gains, if savers neglect to move their money when the bonus ends, they may find themselves left with an account paying an uncompetitive rate," warns Slade. "Currently the onus is on the saver to remember when a bonus period ends.
"Savers need to ensure they fully read and understand the terms and conditions of any savings account, before they commit their money.
"Many of the top deals that have been launched in recent months come with catches to get the best deals."
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