What your bank doesn't want you to know

If you've got an instant access savings account, your bank could be hiding a nasty secret from you. Find out what it is.

How much interest are you earning on your savings? If you took out a 'best buy' instant access savings account say, six months or even a year ago, you may be feeling pretty confident you're earning a decent rate of return.

After all, back then, your account was top of the tables, offering a juicy 6% AER. The rate can't have fallen that much since then - can it?

The answer, I'm afraid, is: yes. Easy-access savings rates are typically variable and, following the massive cuts in the base rate recently, most have fallen dramatically. And sadly, former best buys are no exception to this rule. Take a look at this table showing what the best accounts on offer in September 2008 are paying now:

Best buys six months ago

Source: Moneyfacts 25/2/09.  *Kaupthing Edge savers can get an extra 2% as a bonus from ING if they switch accounts - read more here.

As you can see, the average rate of return has fallen from 6.42% to a measly 2.34% in just six months! That's 0.64% below the rate of inflation, which means the value of your money is deteriorating each day you leave it in one of these savings accounts.

Best buys one year ago

Best buys from February 2008 are paying even less - just 1.62% on average. That's a reduction of 4.69% in the past year, and means you are earning 1.37% less than inflation on your money.

Check your rate

So the message is: if your money's tucked away in what you thought was a decent account, check your rate. Phone up your provider or search their website. Don't assume that, just because you haven't been informed of a change in your rate, the rate has not changed.

Under the Banking Code, in many situations, banks do not have to personally notify customers about changes to their savings rates - instead they can, for example, advertise the change through notices in their branches and in newspapers.

However, if the fall in your rate has been more than 0.25% greater than the fall in the base rate, and you have £500 or more invested, then the bank should have personally notified you. It is also required to contact you if you have £250 or more invested and the rate reduces by 0.5% or more compared to the base rate in a twelve month period. (To find out more, read sections 4.4 and 4.8 of the Banking Code Guidance PDF.)

Of course, as the base rate has fallen by 4% in the past six months, you could easily see a massive reduction in your rate without any notification whatsoever.

Current best buys

Once you know the current savings rate you're earning, you need to figure out whether it's competitive. After all, just because the rate has fallen doesn't automatically mean it is now rubbish account. Check out today's best buys to figure out how your account shapes up.

As this table shows, if you're earning less than 3.09% on your savings, you can easily do better.

Of course there's no guarantee that these rates will still be competitive in six months' time. But at least they're competitive now.

So what are you waiting for? Why settle for less than the best? Ditch and switch your savings account today!

More: Secure a great savings rate now! | Compare savings accounts at lovemoney.com