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Savings not making enough money? Smaller banks may have the answer

Damian Wilson
Jan 22nd 2009 at 6:45AM

Filed under: Banking, Saving, Pension, Retirement

You do not have to be all that old to remember when putting money in the bank was considered the wisest and safest thing you could do with your hard-earned cash.

However savings accounts from major banks have fallen into disrepute in recent times because of the stingy interest rates available.

So those who are living on a pension, plus a bit of income from their savings and any interest on it, would do themselves a favour by keeping an eye on what the less mainstream banks are offering.

A lot of people are nervous when they read about banks which are new to our shores. We have banking codes, customer care requirements and Financial Services Authority regulations to protect us. But do these Johnny-come-latelies stick by these rules?

One bank we don't hear a lot about is the strangely abbreviated ICICI, which far from being some dodgy, off-shore set-up is actually a subsidiary of India's second largest bank.

A few years back when it started to compete with its savings accounts, there were some problems in issuing PINs for accounts and a few customers experienced account issues.

But all that is in the past and now the bank has one of the highest interest rates currently on offer: 4.65% Annual Equivalent Rate (AER) for its new savings account, the ICICI Bank HiSave 1 Year Fixed Rate Account (No Access).

It currently beats the ING Direct Savings Account, 4% (AER), which seems to be advertised everywhere you look at the moment.

Here's a brief head-to-head of the two accounts:

  • Which earns me more? ICICI has a higher interest rate (AER), which means the return over a year will be greater.
  • When do I start to benefit? With ICICI you will only receive that return when the account matures, namely one year. The ING account pays you monthly.

  • How much do I need to start? The ICICI account has a minimum investment of £1,000. ING asks only £1.

  • What if I need my money now? With ING you have instant access to your money, while that is not the case with ICICI. Your cash stays put for a year.

  • Where's my local branch? Neither accounts are available through a branch, they are only accessible online or by phone.
If you want to go into the nitty-gritty, try a comparison website so you can find the account that really suits your needs.

Look for the pitfalls and be careful of seemingly irresistible offers. Often too-good-to-be-true is exactly that...

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