If you're not earning these tip-top rates of interest on your spare cash, then your savings are gathering dust instead of growing.
When it comes to financial produces, "buy and forget" is usually a very bad move.
You see, financial firms know that most of us are lazy, forgetful or downright bored when it comes to financial matters, so they use our inertia to make their shareholders rich. For example, loyal homeowners who stick with the same mortgage lender year after year usually end up paying their lender's standard variable rate. Thus, loyalty can add tens of thousands to the long-term cost of their home loan, so it's makes far more sense to shop around for a better interest rate.
The same goes for savings accounts, too: you mustn't open an account, deposit your cash and switch off, because lenders love to cut rates behind our backs. What's more, they operate what I call the "bait and switch" trick: launching an account with headline-grabbing rates, raking in mountains of cash, and then withdrawing this account to begin the rate-slashing game.
What's more, with over four thousand savings accounts to choose from, it's incredibly unlikely that you've chosen the best account to suit your needs. Hence, it pays to keep an eye on the interest rate which your spare cash is earning, and to compare this with the rates on offer from table-topping savings accounts.
A rough rule of thumb is that, before tax, your savings should earn at least the Bank of England's base rate, which is 4.5% a year at present. However, with a little effort, it's easy to beat this rate, as the following Best Buy table demonstrates (data courtesy of independent financial adviser Moneyfacts):
Best Buy easy-access savings accounts for £1+
Company/Account name | Pre-tax interest rate (% pa) | Notes |
|---|---|---|
ICICI Bank/HiSAVE | 5.03 (5.15% AER) | The highest no-strings |
Northern Rock Tracker Online | 5.01 (4.65% AER) | Includes 0.71% bonus |
Birmingham Midshires Internet | 4.95 (4.95% AER) | Includes 0.65% bonus for a year |
Of course, the more that you have stashed away, the more that you stand to make by switching your savings pot from an inferior account to one of the above Best Buys.
For example, if you have, say, a tidy £50,000 stashed away earning a modest 3% before tax (a better rate than most savings accounts pay), then your annual interest will be £1,200 after 20% savings tax has been deducted. This drops to a mere £900 if you're a higher-rate taxpayer.
Transferring this pot to an ICICI Bank HiSAVE account would boost your interest to £2,060 a year (or £1,545 for 40% taxpayers). That's an extra £860 a year for a few minutes of effort. So, don't leave your savings to gather dust: get them working harder for you today!
More: Use the Fool to compare savings accounts, compare credit cards and compare personal loans!