Consumers can get better deals on travel insurance, mortgage protection policies and savings accounts if they just shop around but many don't bother, writes Laura Slattery.
Consumers are frequently advised to "shop around" for financial products in order to get the most competitive deal, the best interest rate or the most flexible policies.
But sometimes the prospect of just one more winding, roped-off bank queue or one more minute spent on hold is enough to push us into saying "yes" to just about anything that's offered by the first helpful salesperson who makes a point of repeating our name during the conversation (for that special personal touch).
Shopping around is time-consuming and not really much fun. At the end of it all, it can seem like there's not really much to show for our careful research except another piece of paper with another list of complicated terms and conditions and another space to sign across the dotted line.
Not much to show, that is, except a larger bank balance. In many situations, consumers pay over the odds for the sake of convenience or feel that they don't have a choice in the first place. Travel insurance, mortgage protection policies and savings accounts are just some examples of products consumers can shop around for but often don't.
Many of us will take out a savings account at the commercial bank where we hold our current account or, worse still, not bother taking out a savings account at all but keep a reserve of thousands of euros permanently in our current account.
Now that the opportunity to take out a Special Savings Incentive Account (SSIA) and benefit from a 25 per cent Government bonus has passed, interest rates on savings accounts at banks with high-profile branch networks won't be as attractive as those which are a little harder to find and may be operated by correspondence or over the telephone.
"First of all, it's probably a matter of convenience. People leave it all in the one place, that's their first mistake. Secondly, they want to have it at the same bank as they have their current account because if there's an emergency, they think it will be quicker to access their funds, and obviously, it can be," says Mr Tice O'Sullivan of Primafinance.ie.
Bank of Ireland gives interest of 0.1 per cent on balances in its current account, Mr O'Sullivan notes, compared to the 3.25 per cent on offer at Northern Rock for a minimum investment of €1,000.
Northern Rock and Anglo Irish Bank are the two financial institutions most frequently mentioned in connection with attractive interest rates on deposit accounts at the moment.
Less flexible accounts offer the best deals: Anglo Irish's seven-day notice account offers a rate of 3.35 per cent for a minimum investment of €2,000, while savers in Northern Rock's 30-day notice account currently benefit from interest of 3.5 per cent.
Consumers need to work out how many restrictions they can live with before choosing an alternative home for their savings. "If you had an emergency, you might need the money before 30 days, but have enough for seven days," says Mr O'Sullivan.
In the SSIA aftermath, some of the main banks have responded to demand for short-term savings products with reasonable interest rates: Bank of Ireland, for example, has relaunched its SmartSave account, which offers interest of 2.75 per cent to people saving from €40 to €1,000 a month, allowing withdrawals on demand.
Other institutions are also targeting the customer base of Northern Rock and Anglo-Irish Bank. New Ireland is dropping the standard management fee of 1.5 per cent on its Smart Deposit fund for a limited period in order to compete in the market for investors who are "sitting on the fence, waiting for the markets to recover", according to Mr Niall Tinney, New Ireland's investment sales manager.
Applications received on or before December 31st, 2002, will be managed by New Ireland free of charge for up to six months. The variable interest rate under the fund is currently 3.2 per cent and the minimum investment is €5,000. The fund allows investors to switch into equity-based Smart Funds or encash with just 24-hours notice.
Deposit rates change frequently, so some consumers keen to take advantage of the highest interest on offer for low minimum investments will make the switch again and again, ideally without incurring any penalties or loss of interest.
"Certainly people we are dealing with are conscious of how bad the interest rates are at banks and they are actively looking for an alternative," says Mr O'Sullivan. "They might not be comfortable with the stock market or they might have a term product of some kind that's matured and they're looking for an account with interest that will at least try to keep up with inflation."
