New best buy savings account- from a car dealership?
Given the record low interest rates mortgage-payers have been enjoying for some time, the savings market has been in the doldrums, with poor rates leading many to look to alternatives to high street accounts paying pitiful rates. While some have turned to alternative investments, such as peer to peer lending, a new proposition on the market offers a ‘best-buy’ savings account, but from a slightly alternative provider- French car maker Renault.
RCI Bank, part of Renault Group’s financing brand, has jumped in to the savings market with both feet, offering a 1.5% easy-access rate that goes straight to the top of the best buy tables, tables, matching BM Savings' market-leading account paying the same rate. However, RCI’s offering comes with no strings attached, including unlimited withdrawals and a minimum £100 opening balance, while the BM Savings account must pay in a high opening balance of £1,000 and the rate includes a 1% "bonus" for the first 12 months. And it is a good rate, the next best are Tesco Bank (1.35%), Saga (1.35%) and GE Capital Direct (1.3%).
The new brand comes from the French RCI Banque, which provides finance for Renault and Nissan, whose new UK branch of RCI Bank follows similar openings in France, Germany and Austria over the past four years.
RCI is the only car finance company who has ventured into the UK savings market, but it makes sense as a business model- it wants to become more reliant on customer deposits held rather than borrowing money on money markets. Besides being a sensible approach to risk, this also highlights how, from a finance company’s perspective, savers represent a cheap source of borrowing, with even ‘best-buy’ rates being pretty low rates indeed.
But what about the elephant in the room? RCI is owned by a French bank and as such, will not fall under the protection offered by the Financial Services Compensation Scheme (FSCS) which covers up to £85,000. However, our European neighbour has a similar scheme (set up under the same EU directive as the FSCS). The French guarantee scheme is called the FGDR and protects deposits of up to the value of €100,000 (approx. £73,000 ) in the same way as the FSCS. If anything should happen, there is no lengthy French claim process to go through either- the FDGR will contact customers directly and customers should be issued a refund within 20 days.
Steve Gowler, chief executive of RCI Bank, said: “We’re really excited about entering into the UK savings market, and importantly entering the market with an innovative and competitive product.
“We believe we have a product that people will love. Over the next 12 months we plan to follow this up with further product launches.”