Don’t fall for marketing saying you’ll earn 4.8% interest.
I got an email today from an established personal finance website with the bold subject line: “Beat bank rates with 4.8% on your savings!”
My interest (excuse the pun) was piqued. That’s a lot more than you’ll get for your savings anywhere else right now. Surely it’s too good to be true?
You’ve guessed it – that was the case. Though technically accurate, my take on the “account” was this was a very, very bad place to put your money except in the tiniest of circumstances.
Sadly, I’m sure some people will jump at it without reading fully the terms and conditions. I’m actually quite angry about how this is being promoted so I want make sure this doesn’t happen to my readers.
The account in question was for a fintech budgeting app called HyperJar, and here’s why you shouldn’t keep your money there.
What is HyperJar?
HyperJar is mainly a budgeting app based on the “jam jar” principle of splitting up all your spending needs into separate virtual “jars”. You top-up your HyperJar account from your bank, allocate funds to different categories, and then spend with a HyperJar debit card.
I won’t go in to detail here (I’ll look at budgeting apps in the future), but in principle it’s not a bad idea. In fact, it could be a good idea for anyone who finds using real jars or envelopes to budget but wants to take it digital.
But these free features don’t pay the (app’s) bills – so it’s also got the HMoney feature.
HyperJar’s “savings” offer
HMoney is where you can get a 4.8% return. It’s important to note, the marketing blurb on HyperJar’s own website states it’s not interest.
Instead they call it Annual Growth Rate, or AGR. But don’t pay that any attention – it’s just marketing speak. Really you’re getting a promotional reward.
There’s nothing particularly wrong with this – the Chip+1 account which offers 1.25% works in the same way and that account can be worth using.
Yet despite this alternative branding (which is required as they’re not a fully licensed bank), HyperJar clearly wants you to think of the reward like interest on savings.
Their site talks a lot about interest, and how the 4.8% is better than “the interest you get (or don’t get!) at your bank”. It even says “AGR is a little bit like the interest paid by banks”.
But remember – it’s not interest. I think this talk of “a bit like” interest is misleading, which could cause problems. If you say someone can earn 4.8% on their savings, they’re going to expect it to work at least a little like a savings account.
And when it comes to HyperJar it’s a long, long way from any savings account you might have had before.
(I do want to quickly note that HyperJar is not as strong on the “savings” context on its website as the email I received was. But I’m not letting them off completely – that was a paid-for email. Usually, brands sign off on these things so I expect they’ll have been across the messaging sent out.)
Update 17th March 21 – HyperJar got in touch after reading the article. They agreed that the email shouldn’t have been sent with that wording and promised it wouldn’t happen again. That’s a huge win! They also fed back on a few other points, which I’ve added below where relevant)
(Also, don’t worry I’ve never accepted any sponsorship from brands here on the blog or in my newsletter. You can be confident what I share with you is editorially independent and what I think – not what someone wants to pay me to think).
How you earn money with HyperJar
To earn this 4.8% back with HyperJar you need to “commit” to spending with one of their partner brands.
You do this by allocating money to a specific brand “jar” within the app. You’ll then have money added on a daily basis to reflect the AGR/reward rate.
So put in £100, and over a year you’ll get an extra £4.80 added, giving you a balance of £104.80.
But realistically you’re not going to use this for long-term savings. So can spend your saved money earlier, and the bonus you get will reflect this. So if it’s there for 30 days, you’ll get 30/365 of the £4.80, which works out as 41p.
You can add more money to the same retailer pot, or put it towards a different one.
Brands you can save with on HyperJar
There aren’t many brands on there, and of those on there very few are ones you could or would regularly shop at.
At the time of writing, there are just over 20 partners, and the key ones are:
- Laithwaite’s wine
- Virgin Wines
- Bloom & Wild
- Feel Unique
- ATG Tickets
- Not on the High Street
It looks like it used to have Lidl, but that’s not there anymore.
Why it’s a bad place to keep your money
You can’t withdraw your money
Savings can be for a variety of things. Emergency cash, holiday funds, house deposits… the list goes on. But ultimately, whatever you are saving for, you’ve got the flexibility to spend it on something else.
Not with HyperJar. Once you’ve committed money to a partner, it is locked in. You can’t withdraw it. There’s not even a penalty to get the money back in cash.
This is BAD. What if you need the cash? Tough luck. It’s stuck in HyperJar to use at the retailer you select.
You’re effectively buying a gift card for a specific retailer (from a very small selection).
(Update: HyperJar has told me that in exceptional circumstances it is possible to get the money refunded. This will be for situations such as someone has lost their job rather than simply changing their mind. If you want to discuss a refund, HyperJar says to get on the live chat within the app).
The return isn’t really 4.8%
If you keep your money saved for 12 months then you will get the equivalent of 4.8%. But are you really going to keep the money saved with a specific brand for that long? No. So you can’t really compare it to the money you would make from a real savings account.
I think it’s a better comparison to see it as a prepaid cashback bonus.
Let’s go back to the example above of 30 days. That 41p on a £100 spend is 0.41%.
If I spent £100 with one of the retailers listed but used my cashback American Express card rather than a MoneyJar card, I’d earn 1%.
By the same logic HyperJar uses, Amex gives 10% over 12 months! But obviously it doesn’t!
You also don’t earn “interest” on the “interest”, as you would with a normal savings account. It’s only paid on the money you deposit.
You are stuck with a single retailer
You might think, what’s the harm of using HyperJar if you are saving for something sold by one of the retailers? I still don’t think it’s a good idea.
Even if you are planning to buy something from a specific retailer, having the money in cash savings gives you the flexibility to shop around for the best price.
And in my opinion, none of the retailers are the ones where you’d shop week in, week out. Only Shell is one you could spend money with on a regular basis, but they’re rarely the cheapest petrol pumps.
You lose consumer protection when spending your savings
If you paid with a debit card you’d get access to something called chargeback if something goes wrong. But in the terms and conditions for HyperJar, it states “…you agree you will not exercise your chargeback right for any reason that we are not responsible for, such as any dispute you have with a merchant”.
(Update: HyperJar has removed this from the terms and conditions and agree it was confusing, It says the chargeback clause refers only to top-ups not purchases.)
Better alternatives for your savings and spending
So now you’re not distracted by the claim of a 4.8% return, what should you do with your money?
For savings, look at an easy-access account for any money you have now and regular savings accounts for any money you add each month. Here’s my regularly updated guide which will show how to get 2.02% on up to a grand and up to 3.04% on monthly deposits.
For spending with specific retailers, I’d use a cashback credit card instead. If the shop takes American Express you can get up to 1.25% back on every £1 pent. If not you’re looking at a lower 0.25%. Here’s are latest picks.
Plus you can combine both of these. So until you spend money, it’s sitting in savings earning interest. Then when you buy something you earn the cashback on top. And you can repeat this with any retailers, not just those partnered with HyperJar.
Let’s go back to that £100. Remember over 30 days it’d earn 41p via HyperJar. Well, earning 2.02% with Virgin Money would add on 17p after a month. Spent via an Amex at 1% would earn £1. So in total you’d have £1.17 rather than 41p – much better.
FinTech can still be good for savings
I do want to end on a more positive note. Just because I hate this feature with HyperJar, I’m a huge fan of fintech innovations that help us save more money (like Plum and Monzo), or better manage our money (like Yolt and MoneyDashboard). And though it’s not perfect the Chip+1 account does offer a decent rate on savings at the moment.
So don’t be put off all apps because of this – just operate with some healthy scepticism. And don’t worry, I’ll continue to share the good and the bad here on the blog.