Banks are being sneaky about the naff rates they're offering. Ditch the rubbish deals for these market-leaders!
Do you know how much interest you are earning on your savings account? Many of us don’t, not simply because we are not engaged enough with our savings deals, but because banks are being sneaky over the interest rates on offer.
And it’s costing us a small fortune.
The £12bn savings scandal
A new study by Which? has found that almost half of the 1,200 plus savings accounts available in the UK pay less than 0.5% interest, with a quarter paying 0.1% or less! That’s bad enough, but what’s really worrying is that many banks are keeping the fact that we’re earning almost nothing on our money from us, by failing to be upfront about the shoddy rates.
And Which? reckons it’s costing us savers around £12bn a year in lost interest that we would instead be enjoying if we moved to the more competitive rates on offer.
Thankfully some banks have been shamed into promising they will soon be cleaning up their acts, but this should really serve as a warning to not rely on banks to tell us whether they really are offering the best deal for us. It’s time to take control of your cash!
You can’t rely on the banks themselves to tell you which accounts are the best homes for your cash, but thankfully you can rely on us at lovemoney.com!
Inflation is the enemy when it comes to your savings because it attacks real returns, and reduces the purchasing power of your cash.
So which accounts should top your savings wishlist?
Getting a great ISA
My favourite kind of savings account is the ISA. The reason is pretty simple – with an ISA, every single penny you earn in interest goes directly into your wallet, free of the clutches of the taxman. Don’t get me wrong, I’m not some anti-tax preacher, but if there’s an opportunity to make a few quid tax-free, why not take advantage? What’s more, the amount we can save is improving too, as explained in Savers: Earn more interest in your ISA.
You can get ISAs over a range of different time scales. However, with bank base rate bound to start moving upwards soon, I’d be uncomfortable about locking my money up for too long. Below I’ve rounded up my favourite one and two-year ISAs.
|
Provider |
Length |
Interest rate |
Minimum deposit |
Accepts transfers in? |
|
One year |
3% (for current account holders, 2.80% otherwise) |
£1 |
Yes |
|
|
One year |
3% |
£1 |
Yes |
|
|
One year |
3% |
£1 |
No |
|
|
One year |
2.85% (tracks base rate + 2.35%) |
£1 |
No |
|
|
Two years |
3.30% |
£1 |
Yes |
|
|
Two years |
3.10% |
£500 |
Yes |
Building bonds
With a bond, you effectively wave goodbye to your cash for a set period of time, and in exchange get a decent rate. The catch is that you won’t really be able to access your cash while it’s locked away, so you don’t want to put any cash into a bond that you can’t afford to be without.
As with ISAs, I’d be wary of locking my money away for too long. As a result, I’ve only looked at the very best one and two-year bonds in my round-up below.
|
Account |
Length |
AER |
Minimum deposit |
|
One year |
3.11% |
£1 |
|
|
One year |
3.05% |
£500 |
|
|
One year |
3% |
£500 |
|
|
Two years |
3.65% |
£500 |
|
|
Two years |
3.60% |
£1 |
|
|
Two years |
3.50% |
£1,000 |
Regular savers
Bonds and ISAs and the like are all well and good if you’re already a seasoned saver, but what if you are pretty useless at saving and want to get into good habits? Personally, I really like the idea of regular savers – as the name suggests they are accounts that rely on you making a regular, relatively small payment into them, each and every month.
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And you’re rewarded with a fantastic rate for doing so – the current market leader comes from First Direct, and pays a frankly remarkable rate of 8% on your savings, so long as you save between £25 and £300 a month. Sadly, the deal is only open to holders of the bank’s 1st Account current account. However, given the popularity of that account, that’s not the worst catch in the world.
For more on the account, have a read of Earn 8% on your savings!
Easy access
For many of us, it’s crucial that whatever money we put aside in savings should be easy to access in case of an emergency – the pipes bursting, or the boiler packing up for example.
So what you want is an account that will pay a decent rate of interest on your cash, but that doesn’t boast a stack of hoops that you’ll have to jump through in order to get your hands on your own money. Below are the best easy-access savings accounts in the market today.
|
Account |
AER |
Minimum deposit |
|
3.00% |
£1 |
|
|
2.99% |
£1,000 |
|
|
2.91% |
£1 |
|
|
2.70% (for current account holders, 2.50% for everyone else) |
£1 |
|
|
2.61% |
£1,000 |
|
|
2.60% |
£1 |
*Must pay child benefit, or equivalent amount, into the account each month
As you can see, there are a whole host of accounts paying far more than the measly rates many of us are suffering at the moment. Don't rely on the banks to tell you where you can get the best return on your cash - you'll have to do it for yourself!
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