Saving
Bonus rates expire, and the account stops being the one you opened
Introductory savings rates are a marketing cost with a defined end date, and the business model depends on you not noticing it.
These are listed in the order worth acting on, which with introductory savings rates is not the order they are usually presented in.
What matters most
- Introductory bonuses commonly run for twelve months and then drop sharply.
- Banks rely on inertia, which is why the drop is rarely announced prominently.
- A diary entry at the expiry date is the entire defence.
How the pricing works
A headline savings rate is frequently built from an underlying rate plus a temporary bonus that expires after a fixed period. When the bonus ends, the account pays the underlying rate, which can be a small fraction of the advertised figure.
The bank has bought a deposit at a promotional price and now holds it at a much cheaper one, which is the entire commercial logic. This is legal and clearly disclosed, and it works because disclosure at account opening is not a reminder twelve months later.
Inertia is the product
Most savers do not move money after a rate falls, and pricing departments know the proportion who do. The gap between the best available rate and the rate on long-dormant accounts is often large enough to matter on any meaningful balance.
Practically, some regulators have required firms to notify customers of material rate reductions, though the rules and their strength differ by country. A notification buried among other post is not the same as a decision prompt, which is why the defence has to be yours.
Set the reminder at opening
The moment to record the expiry date is the day the account is opened, because that is the only day you will care about it. A calendar entry set for one month before expiry gives time to compare and move without a gap in interest. Recording the rate as well as the date lets you check later whether what you are being paid matches what you agreed.
In numbers, this takes two minutes and is worth more per minute than almost any other savings activity.
Check what you are actually being paid
Statements often show interest credited without showing the current rate, so the rate has to be looked up in the account terms or the app. Comparing that figure to current best-buy rates for the same account type is the check, and it takes minutes. Rates on old products can be withdrawn from sale and left to decay, which is why an account that was competitive three years ago is a poor guide.
The comparison is only fair between accounts with the same access terms, since notice and fixed accounts pay more for a reason.
The cost of switching is mostly time
For instant-access savings there is generally no penalty for moving, and the transfer takes days rather than weeks. Where money is in a tax-sheltered account, moving it usually requires a transfer process run by the new provider rather than a withdrawal, because withdrawing can lose the tax status permanently. The rules for that differ by country, and getting the process wrong is not always reversible.
On the balance sheet, for fixed-term accounts, moving early normally costs an interest penalty that needs to be weighed against the gain.
Rate chasing has limits
Below a certain balance, the difference between a good rate and a mediocre one is small enough that the effort is not repaid. Above that, the arithmetic reverses quickly, and on a large emergency fund the annual difference can be meaningful.
Over a full year, deposit protection limits also matter once balances are large, because spreading across institutions is a separate consideration from chasing rate. A once-a-year review of every savings account captures most of the available benefit without turning into a hobby.
Everything above, in order of what to do first
- How the pricing works. A headline savings rate is frequently built from an underlying rate plus a temporary bonus that expires after a fixed period.
- Inertia is the product. Most savers do not move money after a rate falls, and pricing departments know the proportion who do.
- Set the reminder at opening. The moment to record the expiry date is the day the account is opened, because that is the only day you will care about it.
- Check what you are actually being paid. Statements often show interest credited without showing the current rate, so the rate has to be looked up in the account terms or the app.
- The cost of switching is mostly time. For instant-access savings there is generally no penalty for moving, and the transfer takes days rather than weeks.
- Rate chasing has limits. Below a certain balance, the difference between a good rate and a mediocre one is small enough that the effort is not repaid.
The takeaway
Write down the expiry date on the day you open the account. Nobody else will remind you at a useful moment.
Write the number down before you decide. It usually decides for you.
Questions readers ask
How often should I check my savings rate?
Once a year as a minimum, plus a reminder at any known bonus expiry. Rates move with central bank policy, so a period of rapid change is worth an extra look.
Is it worth moving for a small difference?
Multiply the difference by your balance before deciding. On a small balance it may not be worth the paperwork; on a large one the same fraction is a real sum.
