The savings mistake costing £636 a year as best and worst bank accounts revealed
MILLIONS of savers are missing out on £636 of free cash because they kept their savings in a low-paying account.
One in three people have not switched their savings account for five years, according to credit company TotallyMoney.
Meanwhile, more than a quarter of savers have never swapped their account, which could mean they are missing out on getting the best interest rate.
The average saver has £17,365 squirrelled away.
If this was paid into the top savings account, which has a rate of 4.86%, then they could earn £844 in interest each year.
But if they left it languishing in one of the 20 easy-access accounts with the lowest rates then they would get a return of just 1.2% on their nest egg.
After a year they would have earned just £208 in interest, which would leave them £636 worse off.
If the same saver had just £5,000 squirrelled away then they would still be £183 worse off by not switching their account.
At the top of the best-buy table is Chetwood Bank Easy Access Savings, which currently pays 4.86%.
There is no minimum amount needed to open the account and you can make unlimited deposits.
All interest is calculated daily and is paid monthly.
Meanwhile, Tandem Bank’s Instant Access Saver pays 4.65% and Yorkshire Building Society Easy Access Saver Issue 2 pays 4.6%.
At the other end of the table is TSB’s Save Well account, which has a return of just 0.5%.
Savings A/C from Punjab National Bank pays 0.75%, Barclays Reward Saver has a rate of 1% and Union Bank of India Savings A/C pays 1%.
It’s important to choose an account which has a higher rate than inflation, which is currently at 1.7%.
This is because if the rate of inflation is higher than the savings rate you are getting then the real value of your money will fall.
Maximise your earnings
Advice from Sarah Coles, head of personal finance at Hargreaves Lansdown:
You worked hard to earn it, so now your money should be working just as hard for you.
There’s no excuse for it to be lying around gathering dust in a current account.
It’s easy to fall into the habit of leaving your cash lying dormant in your current account, but this is a terrible idea.
In many cases, you won’t make a penny in interest, so you’re missing out on a huge amount of money.
You can usually make far more interest from an online bank than you can in the same kind of account with one of the high street giants.
A savings comparison site will help you track down the best rates.
If you leave your savings languishing because it feels like too much effort to find an alternative, a cash savings platform might appeal.
You just open one account, then you can switch between accounts with loads of different banks, and see everything in one place.
They have apps, so making the most of your savings is no harder than just shoving it in a current account and missing out on all this interest.
Meanwhile, the rate at which your savings could lose value may speed up as the Bank of England predicts that inflation will creep back up to 2.5% before the end of the year.
The Bank of England looks set to cut interest rates when its Monetary Policy Committee meets on Thursday.
This could drive down the interest rates that banks offer to savers, which could mean the return you get on your savings falls.
How to find the best savings rates
You should check best buy savings tables every few months to make sure that you are getting the best rate on offer.
You can use a comparison website such as Moneyfactscompare.co.uk or Go Compare to do this.
These websites let you filter your search to an account type that suits you.
There are four types of savings accounts: fixed, easy access, regular saver and Individual Savings Account (Isa).
A fixed-rate savings account pays you a high interest rate if you lock your money away for an agreed period.
Some accounts will let you make a certain number of withdrawals during the term, while others will not let you withdraw your money.
Some banks will charge you a hefty fee to access your cash.
This means that even if interest rates increase you cannot withdraw your money and put it in a better account.
An easy-access account gives you immediate access to your cash and usually allows unlimited cash withdrawals.
These accounts often pay a lower rate than fixed-rate ones but they are a good option if you need to move your money, for example if your car breaks down or a pipe bursts.
With a regular saver account you put away a certain amount of money each month for a set period.
They usually pay a decent return but the amount you can save each month is often quite low.
Lastly, an Isa is a tax-free savings account in which you can save up to £20,000 each year.
Best and worse accounts revealed
Here we reveal the best and worst savings accounts on the market at the moment.
Best accounts
- Chetwood Bank – Easy Access Savings – 4.86%
- Tandem Bank – Instant Access Saver – 4.65%
- Yorkshire Building Society – Easy Access Saver Issue 2 – 4.60%
Worst accounts
- TSB – Save Well – 0.50%
- Punjab National Bank – Savings A/C – 0.75%
- Barclays – Reward Saver – 1.00%
- Union Bank of India – Savings A/C – 1.00%
- NS&I – Investment Account – 1.00%
- Barclays – Everyday Saver – 1.16%
- Santander – Limited Access – 1.20%
- Halifax – Reward Saver – 1.20%
- Halifax – Bonus Saver – 1.20%
- Bank of Scotland – Advantage Saver – 1.20%
- Lloyds Bank – Club Lloyds Advantage – 1.20%
- Co-Op Bank – Select Access – 1.25%
- Sainsbury’s Bank – Extra Saver – 1.30%
- Sainsbury’s Bank – Defined Access Saver – 1.30%
- Bank of Scotland – Access saver – 1.35%
- Lloyds Bank – Easy Saver – 1.35%
- Halifax – Reward Saver – 1.35%
- Metro Bank – Instant Access – 1.40%
- Paragon Bank – Double Access Saver – 1.50%
- Paragon Bank – Triple Access Saver – 1.50%
- TSB – Easy Saver – 1.50%
There are four types of Isa: a cash Isa, stocks and shares Isa, innovative finance Isa and Lifetime Isa.
These accounts can be helpful for people who are at risk of needing to pay tax on any interest they earn from their savings.
If you are a basic-rate taxpayer then you can earn up to £1,000 in interest from your savings each year tax-free.
This falls to £500 if you are a higher-rate taxpayer and disappears entirely for additional-rate taxpayers.
How to swap savings account
Most banks will let you open a savings account online, in branch, by telephone or using its app.
Once your account is open simply withdraw your cash from your existing account and pay it into your new one.
Consider any penalties for taking out your cash before you transfer your money.
Never withdraw money from one Isa and pay it into another as you will not be able to reinvest that part of your tax-free allowance again.
Instead, contact the Isa provider you want to move to and fill out an Isa transfer form.
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