Debate Magazine


Posted on the 21 May 2015 by Markwadsworth @Mark_Wadsworth

What puzzles me is that banks are adopting two diametrically opposed strategies regarding how much interest they pay on deposit balances.
See e.g. This Is Money.
In the red corner
- Nationwide pays 5% on first £2,500; no further interest on larger balances.
- Tesco Bank pays 3% on the first £3,000; no further interest on larger balances.
In the blue corner
- Lloyd's pays 1% on the first £2,000; 2% on balances between £2,000 and £4,000 and 4% on balances between £4,000 and £5,000.
- Santander pays zero on the first £1,000; 1% on balances between £1,000 and £2,000; 2% on balances between £2,000 and £3,000 and 3% on balances between £3,000 and £20,000.
Clearly, having lots of small balances gives you a more stable overall figure but is more actual work/hassle; having a few large balances is a riskier business model but is less actual work/hassle.
But why do the different banks place such different values on these things? It's like one supermarket offering "3 for the price of 2" and another one offering "2 for the price of 3".

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