Banks Stumble as Savers Rush for High-Interest Deals

By Julia Kukiewicz Staff Writer Thursday, 29 May 2008

Banks Stumble As Savers Rush In Top Savings Accounts Interest Rates: Abbey Instant Access – 6.5% Alliance and Leicester eSaver – 6.31% Citibank Reward Saver – 6.2% Alliance and Leicester DirectSaver – 6.13% Citibank Direct Flexible Saver – 6% Related Money News See our other recent related news stories: How to get the best interest on your savings Sarah Wray delves into the world of savings accounts and reveals why now is the perfect time to start saving.

NEW customers eager to take advantage of great savings rates in the wake of the credit crisis are facing long delays.

Banks and building societies have stepped up savings rates to draw in valuable funds which they hope will keep them afloat in the wholesale markets.

Seven percent

However, they didn’t count on the popularity of their deals with consumers anxious to save despite the fact that they are now offering as much as seven percent for one-year bonds.

The Financial Ombudsman has noted a marked increase in consumers reporting delays in their accounts being activated and notes that they’re missing out on valuable interest.

But the banks are refusing to backdate lost interest for delays of less than 14 days, claiming that customers were warned that the process might take some time.

The Culprits

The chief culprit appears to be Barclay’s Bank which apologised to the thousands of customers experiencing administrative delays when trying to sign up to its Tax Haven cash ISA.

"We've received record levels of applications for our ISA,” claimed Barclays' retail customer service director, Catharine French.

“We just didn't expect demand to be this high.”

Last year, however, applications for Barclays' Tax Beater ISA were also subject to long delays leading to hundreds of savers losing their £3,000 tax-free cash Isa allowance entirely.

You would have thought that Barclays would have learnt their lesson especially since the Tax Haven ISA now pays 6.25% including a 1% bonus which lasts for a year.

Last year's Tax Beater ISA paid a comparatively measly 5.18%.