Loyalty programs have become increasingly popular since stores and supermarkets began offering two-tier pricing where members pay less for certain items.
Now the trend of loyalty pricing is extending to savings accounts.
Vendors have been surfacing an increasing number of accounts with a “loyalty” or “exclusive” label. The idea is to reward long-standing customers, for example by paying higher savings rates if you also maintain your current account with the provider.
I have no objection to this: there is nothing wrong with rewarding loyalty. But, as always, the big question is: are they really worth it or is it all smoke and mirrors?
Unfortunately, the answer is that they are usually not worth it. You’ll likely still find better rates by transferring your money elsewhere.
Most ‘loyalty’ or ‘exclusive’ accounts are generally not worth the money, as you are likely to find better rates by transferring your money elsewhere.
Often, the extra interest you earn as a loyal customer is a small change, enough to buy a couple of cups of coffee a year.
I’ve applied the rule to the entire savings market and in most cases it appears to be a marketing gimmick. And one that’s easy to get caught up in, as it seems like they’re offering you a special deal. For example, let’s take Halifax’s easy-access Reward Bonus Saver, which is only open to some of its current account holders. Pay 3.8 percent if you restrict the number of withdrawals you make in the year to a maximum of three.
Your ‘reward’ is minimal compared to the 3.7 percent paid into your Bonus Saver, the same account that is open to everyone. The 0.1 percentage point loyalty boost gives you just £10 extra interest a year for every £10,000 you save.
There’s not much to write home about, right? And you only earn the extra interest for one year, after which it’s put into your Instant Saver, where the rate is as low as 1.45 percent.
It also pays that extra 0.1 point to some current account holders on their fixed-rate bonds or one- or two-year Isas.
Lloyds Bank is offering similar paltry ‘rewards’ to Lloyds Club current account holders.
Barclays offers extra interest on its 18-month fixed rate bonds and Isas. But it pays 3.8 percent for its Premier customers, just 0.05 points above the 3.75 percent available to everyone.
That gives you an extra £5 a year for your loyalty for every £10,000 saved.
Kent Reliance’s new exclusive two-year bond pays 4.61 per cent to some savers already in the bank, just 0.05 percentage points above its normal rate of 4.56 per cent.
Building societies are also in on the action. Scottish BS pays 4.25 per cent of its one-year membership bonus for those who have been with the society for at least one year. Newcomers earn just under 4.2 percent.
There are some hidden gems that are more generous and worth the money.
Skipton has a one-year Save More member bonus that pays a competitive 4.6 per cent to members who joined the society before 14 October.
It’s a generous 0.9 percentage points over your normal one-year bonus at 3.7 per cent – an increase of 24 per cent, giving you an extra £90 per £10,000. The problem is that you cannot transfer the savings you already have in the company to this new account; They have to come from somewhere else.
Virgin Money is also exclusive for its current account holders with 4.61 per cent on its one-year fixed rate cash Isa, 0.5 points above its usual offer of 4.11 per cent.
Their Easy Access Cash Isa pays 4.51pc, a decent rate for this type of flexible Isa where you can put money in and take it out as many times as you want each year. You can only open one cash Isa each tax year with Virgin Money.
sy.morris@dailymail.co.uk