Jeff Salway: Banks that leapt to help over volcano dormant on interest rates

THE alacrity with which the high street banks responded to the woes of stranded holidaymakers last weekend was impressive. And, for the millions of customers stuck at home wondering why the same banks couldn't make a habit of being alert to their needs, it was galling.

The reaction to the chaos caused by the ash from Eyjafjallajokull – which surely exploded only in frustration at being unable to pronounce its own name – was instructive. Within five days, the plight of holidaymakers attempting to return home was being compared with Dunkirk, though the similarities between an extended holiday and standing waist deep in a blood-red sea being strafed by the Luftwaffe are lost on me.

But credit where it's due. Most high street banks were quick to reassure customers that they would be able to access temporary additional credit facilities and that they would be refunded charges on cash withdrawals made while they waited to return home.

They were also quick to provide online information for customers stuck overseas and needing clarification of their banking position. RBS and Bank of Scotland were among the banks that sent mobile phone texts to current account and credit card customers offering extra flexibility with their credit limit if they were struggling to get home from abroad, and giving a number to call for help.

This could be viewed as blurring the line between useful assistance and profiteering, when banks are tightening their lending criteria, as we report on page 44. However the argument that the banks are damned if they do and damned if they don't prevails, given the criticism they would have attracted if they had ignored the predicament of stranded customers.

But having secured some positive coverage with this support, perhaps they can now help the millions of savers stuck in paltry savings accounts. For just when savers thought it couldn't get any worse, it was revealed this week that inflation had risen to 3.4 per cent, plunging even more accounts into negative returns territory. The official rate of inflation is comfortably higher than the interest paid by the vast majority of savings accounts.

Higher-rate taxpayers need a minimum of 5.64 per cent to avoid losing money after inflation is factored in, but there are just four products available that let higher-rate taxpayers' savings keep pace with inflation.

For basic-rate taxpayers needing 4.25 per cent to break even, there are just 44 accounts offering that rate. Many inflation-beating accounts have strings firmly attached, usually a tie-in period of two to five years.

The interest rates paid by Scotland's biggest brands on their most used savings accounts are typically pathetic. Both the RBS instant access account and Bank of Scotland's instant saver pay just 0.1 per cent, as do the latter's variable rate Isa saver and the savings account plus from Clydesdale. To put these rates into perspective, if you had 20,000 in an account paying 0.1 per cent for a full year, you would get just 16 in interest after tax.

This state of affairs will not change soon – interest rates are unlikely to rebound for some time and inflation is likely to have risen again when the April figure is published, after petrol prices reached record levels last week. Savings account providers clearly have no inclination to help customers benefit from the more competitive savings accounts they offer, and many continue to bar existing customers from the new deals. And unless banks extend their ash crisis responsiveness to savers, things may only get worse.