E-savings frozen in small print

by Gill Montia

Story link: E-savings frozen in small print

Savers exercising caution after the difficulties experienced by Northern Rock may be surprised by reports in the press that Egg, the Internet bank, changed its terms and conditions last year to prevent a run on the bank.

In late 2006, Egg amended its contract with customers to allow accounts to be frozen for up to 60 days, if the bank believes its financial stability is threatened.

Consumer attention is also being focused on the disadvantages of holding an Internet savings account in a difficult financial environment.

E-saving accounts have flourished in recent years. They are popular with banks because of low overheads and with consumers because access is convenient and interest rates are generally higher than for conventional accounts.

However, for all the Northern Rock customers queuing outside the bank’s branches in the past 10 days, many more were trying to access their savings on the Internet.

The volume of savers trying to withdraw cash online was way beyond the capacity of Northern Rock’s website, which repeatedly crashed, leaving many e-savings account holders resolved never to use an online-only account again.

Banks and building societies operating online savings accounts generally have terms and conditions that exclude liability in the event of problems with their website.

In addition, some include clauses that allow them to shut down the website to prevent large scale withdrawals.