Passbook accounts pay “derisory” rates

| May 17, 2010

Interest rates paid by banks on passbook accounts are “derisory”, a financial expert has claimed.

Pierre Williams, head of research at MoneyExpert.com, said more than half of passbook accounts pay gross returns of under 1%.

Passbook accounts pay an average interest rate of just 0.99%, 0.24 percentage points lower than the average paid on all instant access accounts.

Williams said the lower interest rates are likely to hit elderly savers hardest as many older people continue to use passbook accounts.

“Many older savers like and value the security and certainty offered by a passbook with their savings account,” he said.

“For banks and building societies there is a cost in providing passbooks and they prefer to deal over the internet or phone.

“Unfortunately it is savers who are paying the price which at a time when interest rates are being slashed is not a price worth paying.

“Savers who genuinely value having a passbook need to search the market and find the best deals.

“There are some out there although increasingly it is the case that you earn more without a passbook.”

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