Smile
turns to a frown as internet bank's interest rates hit 0%
When
Smile internet banking launched 13 years ago it promised higher rates
from lower overheads, cocking a snook at high street banks in the
process. So what's gone wrong?
6
June, 2012
Back
in 1999 internet banking was in its infancy, and at the forefront of
the push into web-based money management was Smile, the bright and
breezy online arm of the Co-op. It launched at the end of October
that year with the best-buy current account on the market, paying a
dazzling 4.25% for balances in credit and charging a relatively low
9.9% on overdrafts.
At
the time it was seen as revolutionary, sticking a boot into those
high street baddies who were mostly paying a measly 0.1%. It said it
could offer such competitive rates of interest because it was online
only and didn't have the overheads other banks were forking out for.
I signed up.
Fast
forward 13 years and it's all gone a bit wrong for Smile and its
customers. The bank has just emailed us all to say that from 6 August
2012, for the first time in its history, it will pay no interest on
any money held in its three current accounts – the standard Smile
account, Smile Student and its fee-charging account Smilemore. Its
overdraft rates will also be going up on those accounts, in most
cases from 15.9% AER to 18.9% AER.
So
what has happened to the bank that was meant to offer something
different? Of course, the interest rate environment has changed
dramatically since Smile launched. Back then the base rate was 5.5%,
now it is 0.5%. And Smile is making its cut from an already paltry
0.12% so customers may barely notice the difference. Other bank's
current accounts are also offering paltry rates.
A
spokeswoman for Smile says its accounts "regularly top tables
for providing excellent customer service. Our existing customers also
benefit from preferential rates across a number of our other
products". And, she adds, "the scrapping of in-credit
interest brings these accounts in line with those available through
the Co-operative Bank".
So
much for customers benefiting financially from the lower overheads of
running an internet bank. Shouldn't it be offering a little more to
its customers at a time when there is a feeling of frustration with
the bigger name banks? And why cut an already paltry rate to nothing
and up borrowing rates when nothing has changed with the base rate?
No comments:
Post a Comment
Note: only a member of this blog may post a comment.