Ditch these `best buy' savings accounts - now!

Thanks to bonus rates, if you took out a savings account a year ago, the interest you'll be earning now is likely to be minimal. And that means it's time to get switching...

These days, if you’re looking for an easy access savings account, there’s a good chance it will come with a bonus attached. And while I’m not against bonuses per se, if you have one, it’s important to remember that it is only temporary, and once it expires the interest rate will drop - significantly.

As a result, once your bonus rate has come to an end, if you still want to earn a decent rate of interest on your savings, you’ll need to switch to a better savings account. And while this might sound like a lot of hassle, believe me, it’s worth it.

Changing rates

Unfortunately, a bonus rate means that what was once a best-buy savings account can rapidly turn into exactly the opposite. And if you’re not prepared to switch once your bonus rate has come to an end, you’re likely to be earning next to nothing on your savings.

If you’re not convinced, the table below shows the top six best-buy easy access savings accounts from a year ago, highlighting the rate of interest they were paying at the time (including a 12 month bonus), and the rate of interest they are paying now:

Source: Moneyfacts 5/10/10

As you can see, in all of these examples, the amount of interest you’ll be earning now compared to a year ago is a lot less – with some accounts worse than others.

One of the worst offenders is the Sainsbury’s Finance Online Saver. If you had taken out the Sainsbury’s Finance Online Saver a year ago, the amount of interest you’d have been earning would be a decent 3.20%. In comparison, the rate you’d be earning now is a measly 0.50%.

The Birmingham Midshires Telephone Extra Account and the ING Direct Savings Account aren’t much better, having paid 3.15% and 3.16% respectively a year ago, and now both paying 0.50%.

Check your rate

This means that it really does pay to keep an eye on your savings to ensure you know when the bonus rate is going to expire and what rate of interest you’re going to be stuck with.

Frustratingly, finding out how much interest you’re earning on your savings isn’t always straightforward - particularly if the account is no longer being offered to new savers. To find out, you generally have three options - pay a visit to your local branch and wait in line, put in a phone call and wait on hold, or hunt out your answer on the lender’s website.

Unfortunately, if you choose this last option, it can sometimes feel like you’re on a wild goose chase thanks to the confusing nature of many banks’/building societies’ websites. And as a result, trying to locate how much interest your savings are earning can take a considerable amount of time.

So to make things a little easier, the table below highlights exactly where to look for savings rates for seven of the major lenders.

Get a better savings account

Once you’ve discovered how much (or how little) interest you’re earning on your savings account, you’re likely to find it’s time to think about moving your savings elsewhere. So let’s take a look at some of the current best buys for easy access savings accounts.

Unfortunately, the interest rates offered on the above savings accounts aren’t as high as those offered a year ago. And as you’ll see, the majority of accounts still include a 12-month bonus rate.

However, if the interest you’re earning on your current savings account is anything less than the rates in the above table, I’d say it’s definitely time to switch to a new account!

The NatWest e-savings Account offers the most competitive interest rate at 2.89%. However, this includes a bonus of 1.85% for one year, so once that year is up, you may need to move your savings elsewhere.

If you’d prefer to avoid bonus rates all together, you could consider the Chelsea BS e-Saver Reward or the Halifax Web Saver Extra. And bear in mind if you’re a Halifax current account customer, you’ll get an even higher interest rate of 2.80% on your savings. That said, you can only make one withdrawal per year with this account.

However, whether you take out a savings account with a bonus rate or not, remember that all of the easy access savings accounts mentioned above have variable rates of interest. And that means they could change at any time.

So whichever easy access savings account you choose, make sure you keep a close eye on it to ensure you’re always getting a good deal on your savings.

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