EBS clones Bank of Ireland "Double" account
Imitation is the sincerest form of flattery apparently, so the folks at Bank of Ireland must be just tickled pink right about now. Looks like their idea for a savings account where the interest rate doubles has just been cogged pretty much verbatim by EBS.
Back in March, Bank of Ireland launched an account called the “Double Your Interest Deposit Account” and advertised it like crazy with pictures of squirrels and acorns and what-not. The account is basically a two-year term that you can get out of after one year without paying any interest penalty. So, in year one you get a pretty ordinary 3% interest, and if you decide to hang in for a second year, you get a very decent 6% interest. So really, it’s a hybrid two-year term account that pays 4.5% AER or thereabouts.
And EBS just had the same idea! They’ve launched an account that – wait for it – has the tagline “Double Your Return!” It works almost exactly the same way as the BOI account, but EBS has made a couple of tweaks. They’ve added a year so it’s a three-year term account, and if you're feeling a bit jittery, they’ll let you take out your money at six-month intervals instead of annually.
So, the EBS account pays 2% in year one, 4% in year two and a staggering 8% in year three. But the real question is, what AER will you earn if you leave your cash in for the full 3 years? Well, their ads say 4.46% which - ahem - is another striking similarity to the BOI account.
My feeling is that these kinds of accounts have come about because the Irish banks know that Irish people trust them about as much as they trust estate agents or boom-time property developers. They also know that Irish people are not inclined to put their money into term accounts these days. And they most certainly aren’t interested in putting money into accounts with terms of more than one year.*
The thing is that the banks desperately want that kind of money, so they are coming up with all sorts of stunts to try and entice cash into long-term accounts. The new breed are offering eye-watering interest rates and safety valves where you can get your money out at regular intervals without paying any interest penalties.
I also have a feeling that Bank of Ireland’s “Double Your Interest Deposit Account” has been a roaring success for them. They’d never let on how much loot they’ve managed to get in the door with it, but I’m guessing it’s heaps because they are on to the third incarnation of the account since March.
Generally, gimmick accounts like these have deadlines before which you need to sign up if you want the special rate and the banks use language like “Limited Offer” and “Don’t miss this opportunity”. This is essentially done to generate a sense of urgency. The latest “Double Your Interest” account is set to expire on June 29th and the EBS “Double Your Return” is set to expire on July 8th. The bank staff selling these accounts can then use the deadlines as tools to convince customers to sign up NOW before it’s too late!
End of unlimited guarantee***
Another reason there may be a sense of urgency created around these accounts is that the unlimited government guarantee is due to end on June 30th. However if you sign up to a term account before that date, your money is still protected under the unlimited guarantee. Another great selling point for the banks and you can be sure they'll add that one to their toolbox too.
You can be darn sure that if the banks find a formula that works, they’ll do another issue and then another after that. The Bank of Ireland account hasn’t changed in any way but they are already nearing the deadline for issue three. The interest rates are the same and the rules are the same, they are just closing down each issue and then going “oooh, that worked well, let’s do it again.”
And that’s got to be where EBS comes in. They’ve obviously been watching Bank of Ireland’s latest gimmick and figured they’d give it a bash themselves. And since banks are always cogging each other's homework there probably nothing that BOI can do to stop EBS from using their idea.
Another hint that the "double" account has been working really well for Bank of Ireland is that they launched something of a clone last month. They called it the “Elevator” and it was a six-month term where you got 3% for the first three months and then an “Elevated Rate” of 4% for the second three months. Then they yanked the account after just a couple of days. Probably because it sounded daft, the rates were rubbish and they didn’t want to do anything to distract attention from the Double Your Interest account.
All four Irish Banks offering 4% or more
EBS and Bank of Ireland are far from unique in offering massive interest rates to customers that are prepared lock their money away for a while. AIB is offering 4.2% on their latest two-year term and gimmick kings Permo are still flogging their “Interest First” account where they’ll give you 8% up front in return for trousering your money for two years - which works out at 4.2% AER. EBS also has an old-fashioned no-frills 18-month term account that will get you a very decent 4.29% AER. So now every Irish bank is offering 4% or more on accounts of two years or less.
I suppose the moral of the story is that if you’re prepared to take a white-knuckle ride with your savings in a busted Irish bank for two years, you’ll get a very decent interest rate for your trouble!
*Term accounts of one year or less is by far the most popular term account search on bonkers.ie.
**The image used in this piece is a combination of the promotional images used by Bank of Ireland and EBS for the accounts referenced.
***Update 24th June - the government's unlimited guarantee has been extended to the end of 2011. I explain this in response to a comment below.