A Bank quietly lowers interest rates on saving accounts

Curious1002

Hi All knowledgeable people.

I need some independent advice or rather an opinion as I only really heard the side of my bank and it doesnt sit with me well.

For the last 15 years I have a current account with one of the main Irish banks. As it happened, about 2 years ago I received a redundancy lump sum and didnt really know what to do with it other than put it aside for tougher times. I inquired with my bank about my options and they pushed various investments but I was not interested in it as it's always connected to a risk and I am the most unlucky guy on the planet - so I would be first to lose within the first hour.
I was advised by my bank to open 3 separate saving accounts with €15K each and earn 1.35% interest per year. I happily agreed. A year passed and I was looking forward to see the 1.35% interest (less 35 or 37% Tax of course) to be deposited in my account but to my dismay I received a fraction of what was agreed with me at the start.
So I scheduled a meeting with a bank representative and learnt that the bank changed the interest 3 times within that year and systematically reduced the interest rates from 1.35% to 1% shortly after I opened the accounts, then from 1% to 0.75% and finally from 0.75% to 0.5% a few months later.

I was shocked to learn about it at the meeting. I asked the guy why did the bank not inform me about lowering the % despite having my mobile, email and a postal address and the guy said that the bank informed the customers by posting the info on the bank website!!!
I said that no customer will be checking the bank website every day in an anticipation of changes especially that there are like 50 different pages and sub-tabs of the website so we dont even know where to look. He said that the bank fulfilled their responsibility by informing their customers about the changes on their website. Period.

My question to all of you here is does that sound right to you? Should i request to speak to some higher profile bank managers or should I make an official complain or maybe even send a note to an Ombudsmen?
Or maybe this is absolutely ok and this has been practiced for years by banks? If this has been happening for a long time and done by all Irish banks then I think this should definitely change and customers should take action against such misinformation.

It just doesnt sit well with me and even though we are talking here about a few hundreds of euros but I somehow feel totally disrespected. It's not even that they changed the % to lower 3 times within a year but that they were sitting quietly for a full year and waited when we, the oblivious customers, figure out the rip-offs ourselves at the end.

I know that people have bigger problems now than complaining about their savings but the bank silence is something that bothers me a lot and makes me wonder what else they do to people that we are not aware of.

Any opinion and advice is greatly appreciated.

3DataModem

Yes, this is standard practice. They also don't inform you when the rates go up, for what its worth.

You would most likely have signed something that confirmed you understood what you were getting yourself into when you opened the accounts.

If you want guaranteed rates over a period, some insurance companies do "guaranteed bonds" with terrible rates, or you can go with An Post https://www.statesavings.ie/our-products with pretty-bad-but-not-zero rates.

Inflation is low, interest rates are low, therefore for the thrifty saver there are very few options out there over the short term.

Curious1002

Many thanks!
I bet that we would hear from banks the moment they decided to increase the rates. It's something they would want to brag about. I never before heard about a bank increasing the rates for their existing customers but for new ones only so in reality you would need to close your account to reopen it in order to avail of the better rate.

The silence from the bank is one thing. But funnily enough I got an email back in August from the same bank informing me about them increasing their bank charges with a flat fee of €72 per year. They were by law obligated to inform their customers about it so why not about lowing the interest rate. I was just an email away.

I am long overdue to change my bank and the latest moves only make it easier for me. Now the question is whether there is a bank that we can actually trust - but that's another story.

Thanks again for your reply. I remember that I did explore An Post and the State offer and would have considered them but they would require to freeze the access to my funds for a longer time. I figured that the 1 year with my bank for 1.35% was better than 1% for 3 years with the State Bond. Now I understand what the trick with my bank was. I'm such a sucker for falling for that.

GerardKeating

Curious1002 wrote: »

I am long overdue to change my bank and the latest moves only make it easier for me. Now the question is whether there is a bank that we can actually trust - but that's another story.

Most Banks have interest rates at or near zero, some even have negative rates for very large deposits.

The best i could find was 2% on the first €1,000 and 0.01% on anything over that.

Ohmeha

If it's the bank and savings accounts I'm thinking of they are covered in their T&C's section 7 and more specifically 7.4 by using "or" excessively below.

Basically it's up to you to check the website or the branch for the latest rate. And yes you will never hear the end of it from banks by ads, post, phone calls when they are raising their savings rates and when they are reducing their rates it will be buried in the back of their websites but once it's line with T&C's you agreed with then the Ombudsman will hear your grievance but they will ultimately politely tell you to go away for wasting their time

"We will give you details of the applicable interest rate(s) on the Account by giving or sending them to you or by showing them in our branches or on our website..."

Jim2007

Curious1002 wrote: »

Many thanks!
I bet that we would hear from banks the moment they decided to increase the rates. It's something they would want to brag about. I never before heard about a bank increasing the rates for their existing customers but for new ones only so in reality you would need to close your account to reopen it in order to avail of the better rate.

One can only assume that you must live in some kind of a bubble then. Everyone in the country knows that rates have been going down, it's been in the papers on the news etc....

And all banks have always applied current interest rates to all customers, not just knew ones.

Curious1002 wrote: »

I am long overdue to change my bank and the latest moves only make it easier for me.

Well if you do, I'd recommend that you read the terms and conditions in full of your account and make sure you understand how it will operate. And you'll find that they all operate pretty much the same way.

dubrov

Jim2007 wrote:

And all banks have always applied current interest rates to all customers, not just knew ones.

That's not really true. They systematically create new account types with better interest rates to attract new customers while simultaneously decreasing the rates of older accounts.

Curious1002

You got me thinking about the T&C and the agreement I signed when I opened my 3 saving accounts. I never actually got anything until 6 or 7 months later. Here is what happened:

On the day of opening my 3 saving accounts back in early 2019 I signed only a single document with a bank manager allowing them to transfer money from my current account to the 3 new saving accounts. Then a month later I got 3 separate "congratulations" letters by post informing me about the successful opening of the 3 accounts for 1.35% each. That's all I got.

Six of seven months later I got 3 identical letters (attached one of them) saying that they forgot to forward me the T&C and all additional documents associated with my 3 saving accounts. It specifically says that they assure me that even when they forgot to forward me the T&C this does not affect the way my accounts work. Yet they failed to inform me in this letter that in fact they already lowered my interest rate twice at this stage (from 1.35% to 1% and from 1% to 0.75%) and a third change was coming in the next few months.

Based on the fact that on the day of opening the 3 saving accounts they never explained to me the possibility of lowering the interest rate to their liking and the fact that for 6-7 months I was not forwarded their T&C do I have a case to "demand" the old interest of 1.35% or at least to ask them to apply the 1.35% until the day they informed me about their T&C?

On the side I can tell you that the T&C was a thick booklet and since I was already 6-7 months into my savings I never bothered to read it, especially that they confirmed in the letter that nothing has changed or affected my savings.

The letter from the bank admitting their blunder:

The J Stands for Jay

In an interesting coincidence, I received a letter from PTSB informing me that they were reducing the interest rate on a savings account I had with them. I stopped banking with them years ago, so I had a look into it. Apparently I had €0.06 in a savings account with them.

ILikeBoats

McGaggs wrote: »

In an interesting coincidence, I received a letter from PTSB informing me that they were reducing the interest rate on a savings account I had with them. I stopped banking with them years ago, so I had a look into it. Apparently I had €0.06 in a savings account with them.

I got those letters today on a few accounts I have. Most going to 0.01%
One going from 0.9 to 0.2

daheff

OP

You need to make an official complaint to the bank. Outline what has happened and what you want them to do. Give them a defined timeframe on when to give you a full & final answer.

If/when they refuse to fix the problem you need to then escalate it to the banking ombudsman.


Really though, I can't see you getting anything as even if they had told you of rate changes the other Banks cut rates at similar times and are all at next to nothing.

dara10

I don't think all banks operate that way. Last week I got a letter from PTSB to notify me that the interest rate would be dropping on my savings account in December. This week I got an email from AIB to tell me their savings interest rates dropping in January.
I think the days of getting interest on savings are over.

POBox19

You could argue with the bank until the cows come home, it’s just going to stress you out. Rates have been heading south for years and your accounts are variable interest investments dependant on the financial markets. ECB rates are actually negative at this time, have been for a while and are likely to stay like this for a while yet. It doesn’t matter where you put the cash at the moment interest rates are rubbish. If you fancy a punt try the stock market, but be prepared for your investment to go down as well as up.
I recently received an email from my bank advising me that the interest on my accounts would be going down to 0.00%!
Time to pay down debt and any annual bills with a charge for paying monthly and look for discounts for paying up front, that way the money works for you.

Curious1002

I hear you all. There is no award anymore for keeping our money in banks on any accounts (savings, current, investment, etc) like it used to be. By keeping the money in a bank we automatically allow bankers to operate them to their own advantage and cash on their investment while we dont even know that they use our money for their investment.

Sad times when someone who has €1000 spare in a bank at the age of 20 and decides not to touch it for the next 30 years, will end up with minus €10.000 at the end for account maintenance, negative interest and other charges. A complete disgrace.
I dont know any regular customer who has ever won a dispute with their bank.

Jim2007

Curious1002 wrote: »

I hear you all. There is no award anymore for keeping our money in banks on any accounts (savings, current, investment, etc) like it used to be. By keeping the money in a bank we automatically allow bankers to operate them to their own advantage and cash on their investment while we dont even know that they use our money for their investment.

Sad times when someone who has €1000 spare in a bank at the age of 20 and decides not to touch it for the next 30 years, will end up with minus €10.000 at the end for account maintenance, negative interest and other charges. A complete disgrace.
I dont know any regular customer who has ever won a dispute with their bank.

You would seem to be unaware of commercial reality! The reason the banks are discouraging you from depositing money with them is because they can't lend it out on a commercial basis. And expecting a bank or any other business to carry a loss for you is just not going to happen.


If you want to get a better return you are going to have to accept a higher risk rate.

Bubbaclaus

Curious1002 wrote: »

I hear you all. There is no award anymore for keeping our money in banks on any accounts (savings, current, investment, etc) like it used to be. By keeping the money in a bank we automatically allow bankers to operate them to their own advantage and cash on their investment while we dont even know that they use our money for their investment.

Sad times when someone who has €1000 spare in a bank at the age of 20 and decides not to touch it for the next 30 years, will end up with minus €10.000 at the end for account maintenance, negative interest and other charges. A complete disgrace.
I dont know any regular customer who has ever won a dispute with their bank.

I don't think you understand how a bank works. They are providing you with a service and like any other business they need to ensure they are profitable, or else eventually they will be gone.

You can't expect a bank to give you something for free when it costs them money to do so, you wouldn't expect it from any other business.

Curious1002

"Banks provide service". I always thought that with the goods and services I always have a say- if i dont like something I dont buy it but this is not the case with "bank services". If I was allowed not to have a bank account then I would have loved not to have one. I would want to link my foreign bank account with my Irish employer but I am not allowed to do it either. I shopped around and discovered plenty of EU banks have no (never had) charges and where an interest rate on savings or even on current account is great. All accounts are also guaranteed up to €100K so no worries in case of a bank collapse.

Having a bank account is compulsory and just a few weeks ago if we played our cards properly we could have avoided all the totally unnecessary charges. From all the responses I see that all other banks, but mine, had the decency of informing their customers about changes that related to their accounts. I moved my money abroad in May for 2.85% for a year so this whole experience opened my eyes on other opportunities, which is good.
There is a reason why bank execs were (and are) called white collar criminals.

Jim2007

Curious1002 wrote: »

I moved my money abroad in May for 2.85% for a year so this whole experience opened my eyes on other opportunities, which is good.

Well hopefully you paid a lot more attention to the terms and conditions this time, because the average deposit interest rate is about 0.5% and nobody pays you more than five times the going rate unless somewhere buried in the T&C is a higher risk profile.

Curious1002

Jim2007 wrote: »

Well hopefully you paid a lot more attention to the terms and conditions this time, because the average deposit interest rate is about 0.5% and nobody pays you more than five times the going rate unless somewhere buried in the T&C is a higher risk profile.

Thanks, Jim.
I certainly did read the T&C this time with the new bank as I got all documents on the day I signed an agreement, not 6 months later like with the BOI. I also asked the new bank all relevant questions, especially about the communication, changing %, security, tax, hidden cost and any other charges. Back in May I got really good interest rates (2.85%) and the great thing about the agreement with this bank is that they honour the rate until the agreement expires, which is after 12 months. New saving accounts opened after May do have smaller interest rates but mine is secured for the year on the level of 2.85% (see below). They do inform me about everything regularly and that's what I would have hoped from my Irish bank.

But the truth is that if in May 2021 the new bank comes up with something funny and wont pay the agreed 2.85% minus Tax on interest 19% (here DIRT is 33%) then I will learn how much of a naive fool I really am.

Jim2007

Curious1002 wrote: »

Back in May I got really good interest rates (2.85%) and the great thing about the agreement with this bank is that they honour the rate until the agreement expires, which is after 12 months.

And did you get an explanation as to why they need to offer you a rate that is 5 times higher than the average European rate?

PHG

Curious1002 wrote: »

There is a reason why bank execs were (and are) called white collar criminals.

I agree that Irish Banks are expensive but you can lodge about €2k into a KBC account per month and get free banking. That new account you mentioned seems a bit odd offering that amount, will be curious to see how it turns out if you can let us know upon maturity.

If you dont need it for a few years e.g. >=5 then stick it in an index tracker like S&P500, the probability of making a positive return over a 5 year period is around 90% if I remember correctly. It won't make you rich but should beat inflation.

As for the quoted bit above. Personally not keen when the public say this. I did work in a high street bank to pay for Uni and can honestly say the people in there are in no way responsible or have ANY idea what goes on in the market. They just get the crap from the general public who see them as the bank. Also, most people that work in banks are some form of IT, there is no great scandal that the bankers are out to get the general public. Most banks revenue comes from taking trading orders from large clients.

Working for an Irish Bank in any form is not a sexy role 😉

Bubbaclaus

Curious1002 wrote: »

Thanks, Jim.
I certainly did read the T&C this time with the new bank as I got all documents on the day I signed an agreement, not 6 months later like with the BOI. I also asked the new bank all relevant questions, especially about the communication, changing %, security, tax, hidden cost and any other charges. Back in May I got really good interest rates (2.85%) and the great thing about the agreement with this bank is that they honour the rate until the agreement expires, which is after 12 months. New saving accounts opened after May do have smaller interest rates but mine is secured for the year on the level of 2.85% (see below). They do inform me about everything regularly and that's what I would have hoped from my Irish bank.

But the truth is that if in May 2021 the new bank comes up with something funny and wont pay the agreed 2.85% minus Tax on interest 19% (here DIRT is 33%) then I will learn how much of a naive fool I really am.

I assume you know that you still need to pay Irish DIRT of 33% on this interest, assuming you are Irish tax resident?

POBox19

Interesting, you’ve transferred the risk into the financial markets.
The interest rate seems good for the next 12/24 months, but if the euro gets stronger against the currency you’ve invested in it could end up costing a lot more and you’ll still be liable for dirt tax on the interest. If you do well on the exchange rate you could have capital gains tax as well!

Curious1002

Jim2007 wrote: »

And did you get an explanation as to why they need to offer you a rate that is 5 times higher than the average European rate?

Yes, that was one of my first questions I asked as they indeed offered interest rates higher than any other bank on the market. They explained that they are a large Italian bank entering a new foreign territory (Poland) in October 2019. They needed to attract clients with capital offering a product/service that is much better to the existing offers on the market, hence much better rates. Even when the pandemic hit the world in March they still kept the high interest rates intact but finally after May 2020 they had to start decreasing the % just like every other bank does. I presume it's the same when a new restaurant or a shop announces their opening - you are given free vouchers, half price meals, free samples for a short period - this is all to attract new clients and to spread the news. I happened to avail the good rates before they started to lower them, but the agreement clearly states that once the contract is signed for a specific period they will honour the rate that applied the day the contract was signed.

PHG wrote: »

I agree that Irish Banks are expensive but you can lodge about €2k into a KBC account per month and get free banking. That new account you mentioned seems a bit odd offering that amount, will be curious to see how it turns out if you can let us know upon maturity.

Yes, I looked into that as I was very interested in the KBC but learnt an interesting news - they dont operate cash transactions. This means that if I happen to sell a car and get €10K cash for it I will not be able to lodge the cash into my KBC bank at all. The guy in the bank said that I will have to go to the post office, buy a postal order, pay the post office fee for it (depends on the amount) and then lodge the PO into my account in one of the very few KBC offices in person. There are no cash machines for KBC either so I may have 100K in my bank account but wont be able to buy an ice-cream on the street cos I cant get cash easily. I rarely do cash translations these days but I bet that the moment I sign up with KBC I will need to pay for something with cash.

PHG wrote: »

If you dont need it for a few years e.g. >=5 then stick it in an index tracker like S&P500, the probability of making a positive return over a 5 year period is around 90% if I remember correctly. It won't make you rich but should beat inflation.

100%. I was looking into that too and I would like to try this. In the past I could place a tiny bet on something only to lose it all 5 mins later. I could stand by someone who placed a bet and they would lose it all. I could even look at or think of someone who placed a bet and this person would lose it all. I am cursed so I wonder if any form of investment is even possible for me.

Bubbaclaus wrote: »

I assume you know that you still need to pay Irish DIRT of 33% on this interest, assuming you are Irish tax resident?

I am an Irish resident and pay all my taxes here, including the Irish DIRT which I paid until May 2020. I was allowed to open a new bank account Poland as I am a Polish citizen where the DIRT is 19%. I strongly hope that when my 1 year saving account matures next year I will only pay the 19% Polish DIRT, not the extra 33% Irish tax or the difference (14%). Wouldnt that mean that I am double taxed? I thought that a double taxation has been abolished in all EU countries. If I need to pay the extra 33% of an Irish tax then I am screwed and my extra income from the modest savings will last me for a good birthday dinner.

POBox19 wrote: »

Interesting, you’ve transferred the risk into the financial markets.
The interest rate seems good for the next 12/24 months, but if the euro gets stronger against the currency you’ve invested in it could end up costing a lot more and you’ll still be liable for dirt tax on the interest. If you do well on the exchange rate you could have capital gains tax as well!

Thats very true and back in May 2020 totally accidentally I benefited on the currency fluctuation. €1 was usually 4 PLN for years and years but in May 2020 when I moved my money to Poland the bank gave me an astonishingly good exchange rate €1 = 4.52 PLN, which I have never seen that high before. I exchanged all my Euros to Polish zloty and put them away for 1 year for 2.85% interest. So now it's just a waiting time.
If the exchange rate changes back to €1=4 PLN in a year time and if in May 2021 I get the savings + 2.85% interests rate x 19% Tax then I am a happy man cos I benefited on a nice interest rate and a currency fluctuation. But since I'm cursed and with no investment sense then all I hope for is to get my initial lump sum back.