It’s the UK’s biggest building society, widely trusted, with a loyal user base. Yet, if you like the strength and values of the Nationwide, you may be surprised that its existing customers don’t get the best deals – it often saves them for rate tarts going through its little known sub-brands.
I was inspired to blog on this as a fortnight ago in the weekly e-mail, we listed the easy-access best buy as the Derbyshire Building Society. A few people commented that they were never sure about saving in a small, local building society, so in last week’s email I put this…
Top 3.06% ‘Nationwide’ savings. Derbyshire Building Society’s 3.06% AER NetSaver (min £1K) is the top easy-access savings, but many don’t realise it’s part of Nationwide, offering an identical rate to its MySave account, but with unlimited withdrawals compared to one annually. Diarise to switch in a year when the bonus ends. See Top Savings." (Note the rate has dropped since this was published in the email).
Both Derbyshire and Cheshire Building societies are ‘trading divisions’ of Nationwide, effectively sub-brands of the same organisation – just using a different name. In legal terms all three are the same entity with just one £85,000 per person, per financial institution safe savings guarantee between them. So, let’s compare rates…
Easy-access savings accounts
|AER Rate (including intro bonus)||Min withdrawal||Withdrawals||Intro bonus|
|Nationwide||2.9%||£1,000||Only one without penalties||1.36%/year|
The Derbyshire’s big advantage is its unlimited withdrawals without penalties, though Nationwide has a higher underlying rate, so if you’re likely to stay loyal for the long term it’s a better deal as in a year’s time you’ll earn more.
Yet with both these accounts the rate plummets in a year, so you’d be far better to ditch and switch both then anyway, and as bonuses act as a minimum rate guarantee (see my Savings bonuses power blog), in the first year Derbyshire’s stronger.
However, neither accounts are currently in the very top best-buys, so see the Top Savings guide for those.
Easy-access cash ISAs
|First year AER||Min withdrawal||Withdrawals||Rate after 1 year|
Here the difference is pretty simple, Cheshire pays more. However, again these aren’t quite the very top rates so see the Top Cash ISAs guide for those.
To borrow £7,500, Nationwide would charge 6.8% representative APR or 6.3% for its existing FlexAccount customers. Yet it’s undercut by Derbyshire Building Society’s 5.8% representative APR via the MoneySupermarket comparison site.
However, here, Nationwide does have the big advantage that you can do a soft search before applying to see what rate you’re likely to get. See the Cheap Loans guide for full info.
Why does Nationwide work this way?
Operating multiple sub-brands is a common bank technique to appeal to different customer bases. It’s known in economics as price differentiation – the ultimate goal of which is to charge each customer the most they’re willing to pay (or give the lowest rate/worst terms possible in the case of savings).
This type of behaviour is usually less common with building societies, though we do see big differentials between in-branch and online rates. However, the merger of Derbyshire and Cheshire with giant Nationwide in 2008 has presented an opportunity for this.
My suspicion is Nationwide uses the sub-brands as a rate-tarts play – in other words it uses them to compete in the best-buy tables for new business from those who are very sensitive to rates.
This way it doesn’t have to unnecessarily offer the same to its loyal customers who’d stick with it anyway – and it doesn’t annoy them by having Nationwide branded deals which are ‘new customer only’.
Thankfully the differences aren’t huge, so this isn’t a great scandal. Yet if you are a loyal Nationwide customer – it pays to check the sub-brand building societies to see what’s on offer.