High street savings accounts suck!

The UK's big high street banks are offering some really appalling savings rates. Find out where you should be looking instead.

You won’t have to look far on the high street to find an array of truly appalling savings accounts. The sheer volume of products with rates of 0.10% is enough to have you diving under your mattress with savings clasped in hand.

At least, that's how you should react. But the big banks know their existing customers are a captive audience. But loyally sticking with what you know is often a recipe for rubbish returns.

Don’t forget that, with pathetic rates like this, £1,000 of your money will be worth just £1,001 in twelve month’s time. That's right, you’ll have earned the princely sum of £1 in interest! Worse still, once you have paid the taxman, you’ll end up with a miserable 80p (or 60p if you’re a higher rate taxpayer) for your trouble.

So, here are some of the high street savings accounts you should most definitely avoid, followed by the far superior alternatives:

Barclays

At Barclays you can pick up that paltry 0.10% rate on the e-Savings account. The same rate is also on offer with the Barclays Cash ISA. It’s true with an ISA you get to keep all the interest tax-free, but that hardly compensates for this rubbish return.

Barclays typically offers market-leading ISAs at the beginning of the tax year, but drops the rate to something pathetic after a year or so. And they're not alone - watch out for this tactic!

Halifax

Meanwhile, at Halifax the rate is slightly better on the Variable Rate ISA Saver at 0.20% on instant access savings. But this only applies to balances of £27,000 plus. Savings of £1 upwards will earn just 0.10% while savings over £18,000 earn 0.13%. Fantastic!

HSBC

In fairness, HSBC has some really great accounts particularly if you already have a packaged current account which may make you eligible for the 8% regular saver. But there are some real turkeys on offer too like the Flexible Saver, which pays an astonishingly bad rate of 0.05%. Even the Flexible Saver with Preferential Rates is only a shade better at 0.10%. Preferential to what, it makes you wonder... Zero?

Lloyds TSB

Moving onto Lloyds, if you put less than £250 into the Lloyds TSB Advantage Saver you’ll get the same, frankly unimpressive, rate of 0.10%. Meanwhile, the Young Savers Account will hardly encourage you to put by some money for the kids with a rate of just 0.50%.

To be fair though, Lloyds does offer a cracking current account which some clever lovemoney.com readers use like a savings account. It's called the Lloyds TSB Classic account and it pays a truly fantastic 4% on balances between £5,000 and £7,000. The catch is, you need to deposit £1,000 a month to be eligible for the account, but you can get around this rule by immediately withdrawing this money or, if you're feeling cunning, setting up a couple of standing orders to send the money in and out each month. You can open up to three of these accounts at once, and the rate is fixed for an unlimited period even though you have instant access.

NatWest

Back to the bad boys. Like so many of the big banks, NatWest offers a whole clutch of accounts which pay 0.10%. The E-Savings Plus account, for instance, pays this rate on savings up to £4,999. Worst still, the Savings Direct Account will give you the same sparkling return no matter how much you put away.

Royal Bank of Scotland

It’s a similar story at RBS where several accounts are no more generous like the Instant Access Savings Account with a rate of 0.10%, and the Telephone Saver account which (tediously) pays the same rate on savings under £10,000.

Santander

Meanwhile at Santander, the Easy ISA also pays 0.10% on savings below £27,000. Even if you can save £40,000 or more, you’ll still only get a return of 0.50%. Likewise, the Monthly Saver pays 0.10% on savings of less than £50,000. And the Flexible Saver for Kids offers a rate of just 0.40% on savings of £1 upwards.

It’s pretty clear you can’t rely on the big banks to pedal decent savings accounts. Unbelievably, there are worse culprits out there. And don’t forget about the many non-interest bearing accounts.

But don’t let all this put you off saving because, at the same time, there are plenty of alternatives which easily beat these rubbish high street savers. Check out all the best easy access accounts on the market below:

6 top easy access savings accounts

*These accounts are available to new customers only.

The top easy access savings account from the AA pays 28 times more interest than many of the dud accounts you’ll find at the high street banks. But you should bear in mind that once the introductory bonuses have disappeared from the best-buys, the rate you’ll be left with probably won’t be much better than their high street counterparts. At this point you’ll most likely need to switch to keep on earning a competitive return.

Recent question on this topic

• kevsmith asks:

  Is the ING Direct saving account for me? Do you have personal experience e.g. what is there customer service like.

  • 
    MikeGG1 answered "No, it isn't best for you. For your current savings, try a 1 year fixed rate bond. You..."
  • 
    kevsmith answered "Thanks for the reply. Would it be best to have my savings and monthly savings in two different..."
  • Read more answers

But, if you want to make sure your rate doesn’t deteriorate, consider the ING Direct Savings Account which guarantees to pay 2.75% for 12 months. You won’t even need to think about switching your savings, as long as the fixed rate stays competitive compared with new accounts which come onto the market during the coming months.

Better still, you’ll get proper penalty-free access whenever you need it. The only drawback is the account is only available to new customers, which means anyone who has held an ING Direct Savings account in the last six months is barred.

But, finally, not all high street savings accounts are bad. Halifax/Bank of Scotland, for instance, pays 2.60% on the Web Saver Extra account which is only a shade behind the best-buys. What’s more, if you already have a current account with the bank, you get an extra 0.20% bringing the rate up to match the market-leading AA Internet Extra. That said, the account only allows one penalty-free withdrawal per year so, strictly speaking, it doesn’t offer easy access.

Compare savings accounts at lovemoney.com

All the savings accounts mentioned in this article are available in the lovemoney.com savings centre or through the ‘Search All Accounts’ tab.

More: Top 13 inflation-busting savings accounts | How to save your savings