Instant-access deposit accounts

Most offshore investors will have a full range of banking relations, from current accounts with cards and cheque books to long-term deposit accounts and bonds. Instant-access deposit accounts fall somewhere between these two poles – offering slightly better rates of interest than current accounts, with almost the same levels of access. For most people, an instant-access deposit account is a valuable addition to their financial set-up.

Access to these accounts is not as easy as with straight current accounts – there’s usually no card or cheque book available, for instance – but it is pretty easy.

Interest rates

However, these accounts vary wildly in the rates of interest they pay. On the face of it, this is a curious situation. Why should two companies, both offering a pretty much identical savings product, tack such different rates of interest on them?

The main answer is that not all financial companies are in the same business, even though they look as though they are. For one bank, current account holders plus investment funds are the way they make their money. For another, taking deposits is traditionally what they do. Each of these approaches means that the company is after a different segment of the market. It therefore spends its money (i.e. pays interest) on the products it feels will appeal to that client-segment and so boost the business it sees itself as being in.

A UK high street bank with an offshore operation is (usually) unlikely to want to compete with former or existing building societies located offshore. These latter firms are almost exclusively in the business of deposit-taking and have few or no current accounts on offer. Thus they can and do offer higher rates of interest on their deposit account, and the high street banks don’t much want to compete with them. Equally, the building societies are not going to want to compete with the high street banks on their home turf.
It is easy and obvious to say it, but anyone setting up a deposit account should shop around. Log on to MoneyFacts. Even better, get your financial adviser to root out the best-paying account for you.

Financial inertia?

It is simple to say, and one would think simple to do as well. And yet it seems that very large numbers of people do not do so, preferring to stick with the easy option of opening a deposit account with their existing bank, regardless of whether it pays a decent rate of interest.

Last year, the UK Consumers’ Association did some research to find out whether this financial inertia applies within the UK. Unsurprisingly, it found that it does. Millions of UK bank account holders were losing out on hundreds of millions of pounds in interest because they could not be bothered to switch to better-paying bank (especially deposit) accounts. On an individual basis, this amounted to over £100 per person.

The current best-paying instant-access accounts from the February issue of MoneyFacts are listed in the table below. These rates might well change in March, but probably not by much. If you’re thinking of setting up any sort of deposit account, at the very least contact the banks and building societies shown. You will be saving money.

Top Five US Dollar rates on deposit accounts

Top Five Sterling rates on deposit accounts

Amount	Provider	Location	Rate	Access
£10,000	Nationwide Int	IOM	4.05	Instant
£10,000	Northern Rock	Guernsey	4.00	Instant
£10,000	Britannia Int.	IOM	3.85	Instant
£10,000	Anglo Irish Bank	IOM	3.80	Instant
£10,000	First Active CI	Guernsey	3.60	Instant

Top Five Euro rates on deposit accounts

Amount	Provider	Location	Rate	Access
€10,000	First Active CI	Guernsey	1.90	Instant
€10,000	Irish Permanent	IOM	1.80	Instant
€10,000	Alliance & Leicest.	IOM	1.75	Instant
€10,000	Nationwide Int.	IOM	1.35	Instant
€10,000	Bank of Scotland Jersey	Jersey	1.25	Instant