HSBC to scrap 'teaser' ISA rates


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A major bank is to scrap "teaser" rates on savings products to make its deals more transparent and reward customer loyalty.

HSBC has launched a new "loyalty" cash Isa which will give customers a variable rate of between 1.4-1.6%, with no introductory bonus.

The deal has become HSBC's only on-sale cash Isa and it has stopped actively offering two other products - the variable rate cash Isa, which was previously available in branch and by phone and the online cash e-Isa. The variable rate cash Isa had a 1% bonus but savers on this deal could eventually end up on a rate of 0.2%.

HSBC said it has stopped offering introductory bonuses on savings accounts as part of moves to simplify deals for customers.

HSBC's new cash Isa is only available to customers who have one of its current accounts or choose to open one. The rate they get will be between 1.4-1.6% depending on which current account they choose.

Customers taking out its new loyalty Isa need to pay at least £1 into it every 12 months to keep getting their rate, which will drop to a standard rate of 0.5% if the 12-month period runs out without any more top-ups being made.

If they then make another payment into their Isa, they will start earning the "loyalty rate" again.
Customers can also transfer funds in from existing Isas and withdrawals are free of charge.

The bank will send out reminders to customers to top up their accounts and write every six months to confirm their rate. HSBC said all existing Isa customers can transfer to the loyalty Isa if they wish.

Oliver Cook, head of savings at HSBC, said: "Our customers have told us they always want to receive the best rate we have to offer, without having to switch Isas every year."

He said that the move to remove introductory bonus rates, coupled with the new Isa, gives customers "peace of mind" about the returns they will be getting.

The use of teaser rates generally to pull in customers has attracted controversy, and consumer group Which? has raised concerns about "zombie" accounts that attract people in with high introductory rates which then plunge - often without the customer realising.

But some pundits have argued that in the current low interest rate environment, any bonus is better than nothing.

Rachel Springall, spokeswoman for financial information website Moneyfacts, said: "Despite there being dark clouds over introductory bonuses, savers who play the market right can use these deals to boost to their savings.

"Customers who would prefer a more transparent savings account without the need to create various diary notes will prefer these types of bonus-free accounts, so they are not caught out after the introductory deal ends. The responsibility is always on the customer to keep an eye on these deals."

According to Moneyfacts' "best buy" tables, Britannia Building Society offers an easy access Isa paying 1.75%, but this rate only applies for someone who does not make more than two withdrawals in a year.

The Financial Conduct Authority (FCA) launched an investigation last year to find out more about how often customers who have been given an introductory rate switch their account.

Other banks have also been slimming down their choice of Isa products.

NatWest and Royal Bank of Scotland (RBS) recently shifted their Isa customers onto newer deals so that everyone now earns at least 1% interest, whereas some older accounts had been paying 0.5%.

RBS/NatWest, which now only offer one variable rate cash Isa per brand, previously said the move would put an end to ''new customers only'' offers and ensure pricing is fair and consistent.

Kevin Mountford, head of banking at the MoneySuperMarket website, said: "HSBC's decision to remove bonus rates on all savings products is more of a reflection on the current market, where fewer saving products include teaser rates. These bonus rates were more prevalent when savings rates were higher."

Mr Mountford added: "The reality is most savings rates drop over time, even on accounts without teaser rates, so it pays to be vigilant and check your rate frequently rather than wait for your provider."

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