Do we currently have the best easy access savings account?

Am I reading this right.

MSE Savings account article

From this article, the best easy access account in their table is 0.96%, and we offer 1%. Surely a great advertisement for us if word got out?

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Unless something’s changed recently Chip’s interest account isn’t open to new deposits - HTB couldn’t take any more money.

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I think you have to take into account that Chip’s interest is actually only 0.5%. The other 0.5% is “bonus” which is not treated the same as “interest”. Whilst this might seem the same, the rules around it are different for example, compound interest and ability to withdraw the “bonus” make it different.

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As the bonus is treated differently, if you make a withdrawal, you will have to wait for a few days for this to work it’s way around the system until it appears in your account.

Thinking further on this, you also need to consider the charges that Chip makes.

At the £1.50 charge per 28 days, that equates to £19.50 per year. So a customer with £2000 in their account after 1 year with a 1% (interest +bonus) and the charges would only benefit from 50 pence.

Compare that to a free savings account e.g. Marcus Account that is free but pays 0.7% interest. To get the same benefit ie 50 pence after a year, they will only need to have £72 in their account. With £2000 in their account they would make £14 interest which is £13.50 better off that with chip.

The point at which chip becomes better is having more than £6500 in savings in the account.

All I am saying is to compare 2 accounts you need to consider everything, not just the heading % rate.

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You also need to consider that your putative £2000 with Chip is aggregated over 12 months of saving, it is not a flat sum over the period. In addition, it may well happen that the £100 trigger is reached in some months of saving, but not all.

I am sure there will be other investors and management that will say my comments are being too negative but the way I look at it, there are investors that will never say anything bad against the company, then there are others that will stay quiet and finally there are those like us that speak up when we disagree or provide challenge. All types of investors are equally important for the good of the company. It promotes reasonable discussion to find a compromise. Not all people can be pleased. We all have a stake in this so are doing it for the best of the company. It’s why company’s have boards with non execs from other companies on them to create balance.

My main critisism with the product as it is now is it has forgotten who the customer is since charging was introduced. In the past we were told by chip that 90% of its customer base was low savers. Given this, it is actually costing them more that not using chip if they are autosaving more than £100 every 28 days and have less than £6500 in their account.

I would be interested to get some stats from Chip breaking down the customer base and providing the number of subscribers of the customer base that are:

  1. Autosaving less than £100 per 28 days
  2. Autosaving more than £100 (so incurring charges) but has less than £6500 in their account
  3. Autosaving more than £100 and has more than £6500 in their account.

Then at least we can see the risk position and try to find a better way to benefit the people in tier 2. There is no golden solution but there could be a compromise.

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At the moment there is no point having 6.5k in Chip as the maximum is 5k in the interest account and no interest on the normal Chip auto save account so I think your data request will be not a representative figure should you get it…

Obviously this will change with the new accounts with no limits being released soon…

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Thanks for the update, I was not aware of the cap. I thought this was a fscs protected account up to £85000.

The cap also therefore poses an important risk that unless you are not paying ie autosaving less than £100 every 28 days, then there are better alternatives to using chip that have no charge.

Yes some might be happy with the charges because of the autosaving aspect, but it comes at a cost above any benefit they will make.

Ultimately is that the intention of the product?

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The new accounts will be 85k protection

the autosaving aspect, but it comes at a cost above any benefit they will make

I think that is something at the moment we will need to wait and see, right now I do think we are alienating some users of Chip given there are other products out there that offer auto saving for free, and have an easier charging structure to understand for other products they offer. I have no idea why we charge every 28 days rather than a full calendar month, what other provider does that?

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You can have access the interest account and have auto saves off so the £1.50/month charge shouldn’t make chip less attractive in that sense.

I agree that 28 days is a bit odd. I think it is easy to slip into thinking this is a monthly charge and then realise, actually, I get charged for a 13th “month” in a year.

Monthly charging would seem to align more with other subscription services.

Ben

This all assumes you pay the 1.50 each month if you dont pay it the calculations all go to pot.

Yes, but if all customers were to do this, Chip would need a different charging mechanism. For those that make manual saves only, why would they use chip? They could get a better interest rate using Virgin Moneys current account that offers 2% interest for lower savers