‘Best buy’ tables give conflicting advice

‘Best buy’ tables of savings accounts, credit cards and mortgages are giving consumers conflicting information on the most suitable financial products – as differences in their assessments of interest rates and terms emerge.

Banks and building societies, aware of the value of staying at the top of comparison tables, are launching more products with competitive rates, but with onerous terms and conditions.

All of the top-paying current accounts, for example, stipulate that their headline rates of interest will only be offered to customers who deposit a certain sum each month. Similarly, the easy-access savings charts are dominated by accounts that severely limit withdrawals – in some cases paying barely any interest to customers who take their money out more than once.

For this reason, financial information providers and price comparison websites – which compile the best-buy tables – have started to use their own rating systems to differentiate between the most useful products and the highest headline rates.

Some still pick the products with the best rates, but others put greater value on consistency of rates or customer service.

“In the last few years, consumers and the financial industry have become wedded to headline prices,” said Kevin Mountford, head of banking at MoneySupermarket.com. “Even the fact that the industry we work in is called ‘price comparison’ is counter productive – it should be comparison in the broadest terms.”

One of the highest profile launches in recent months has been Santander’s Preferred Current Account, which offers to pay 5 per cent interest on balances, up to a maximum of £2,500. Although the balance limit is low, the rate of interest is higher than the best rates on easy-access savings accounts.

However, the conditions state that only customers who pay in a minimum of £1,000 each month will receive the 5 per cent. Account holders who credit less receive no interest – and incur a £2 “underfunding fee”.

In spite of this, Moneyfacts and Moneysupermarket both include Santander’s account in their best buy tables. By contrast, Defaqto’s five-star rating system fails to give it any mention. Instead, Defaqto picks out the Halifax Reward Current Account, which pays £5 on sums of £1,000. David Black, Defaqto banking analyst, said that the rating system took into account up to 80 underlying features in each product.

“Santander’s account is fantastic for switching, but we look at a range – and, on other criteria, it doesn’t do so well,” he explained.

But on the best buy criteria used by consumer group Which?, neither Santander nor Halifax qualify as a “Star Performer”. Instead, Firstdirect – the online arm of HSBC which regularly tops polls for customer service – is judged best for current accounts, savings and mortgages, and only narrowly misses the top spot for credit cards.

”We believe that customer satisfaction is very important when it comes to day-to-day management of your accounts,” explained a Which? spokesperson.

Its chart is therefore based solely on consumer feedback – which reveals the gap between providers offering the highest rates and those giving most satisfaction to customers. For example, the John Lewis credit card picked out by Which? readers fails to appear in any other best buy tables, but brokers said they could understand its residual popularity with holders.

“It’s a premium product and holders like the points system,” said Mountford.

Even so, even these service-oriented customers aren’t averse to restrictive terms and conditions: their top-rated savings account is Firstdirect’s Regular Saver which pays 8 per cent – but only to current account holders, and only on sums up to £3,600.