I've noticed that some banks offer their highest interest rate only on accounts with less than a smallish amount, say 3 grand. But then some banks offer their highest rate only with deposits higher than a large amount, say 20 grand.
What kind of sense does that make?
High rates on small account means that you want them as customers, so that you can make money off other things like credit cards and eventually loans. Basically just spending money to gain market share even if the customers are current loss making. Having an upper limit on account size limits the cost.
ReplyDeleteHigher rates on larger accounts reflects the lowered costs and that you need to compete more to get larger accounts. By the time you get to 100,000 pound accounts most of the customers will know the possible rates on offer and will switch their money around.