Avoid these eight savings accounts!

Some savings accounts are still paying next to nothing in terms of interest. Don't put up with it any longer!

I remember a time when I used to look at my savings account and think, whoopee I’ve earned quite a tidy sum of interest this year! Sadly, those days seem to be long gone. And instead, my whoops of joy have been replaced with a big sinking feeling every time I discover how pitiful my savings are looking.

The trouble is, even if you are lucky enough to get a half-decent rate of interest on your savings when you open your account, you’ll need to keep a very close eye on it. Interest rates are continually changing and it can be so easy to lose track of how much interest you are actually receiving.

The increasing popularity of bonus rates on savings accounts makes this even harder. Bonus rates temporarily bump up the interest rate, and usually, after one year, what had been a good savings rate rapidly transforms into a pretty awful one. As a result, this means it’s time to hunt around for a new account.

The trouble is, so many of us forget to do this, and simply leave our savings languishing in a rubbish account.

The worst offenders

To give you some idea of just how pathetic your interest rate might be, the chart below highlights eight of the worst easy access savings accounts on the market, according to lovemoney.com partner, Moneyfacts.

*Existing current account customers only.

**Savers have to have an existing mortgage with Melton Mowbray BS as the balance is offset against the mortgage.

As you can see, some savings accounts are actually paying no interest at all! That’s right, a big fat zero! Hardly what I would call a savings account. What’s more, two of the accounts paying no interest require you to be an existing customer - but exactly how that encourages you to be a loyal customer if that’s how you’re rewarded, I don’t know.

There’s absolutely no point keeping your savings in one of these accounts when you won’t be earning any interest at all. Quite frankly, you may as well leave your savings under your mattress.

Better options

If you do have a savings account paying little or no interest, please please don’t ignore it! It’s time to ditch and switch because believe it or not, there are better savings accounts out there – as I am now going to prove.

The chart below highlights eight of the top paying easy access savings accounts on the market:

As you can see, it’s still possible to get an interest rate of 2.90% on your easy-access savings. Admittedly, this rate of interest is nowhere near as high as the 6% plus we saw a few years ago, but it’s better than nothing.

Just bear in mind that nearly all of the above accounts include bonus rates for one year – so once that year is up, you will need to see whether your account is still competitive. And if it's not, you will need to switch again.

Related goal

Build up your savings

How to get into the savings habit, find forgotten money, work out the real value of a savings rate and build up that emergency savings pot.

Do this goal

The Halifax Web Saver Extra and the ING Savings Account are the only two accounts which do not include bonuses. 

However, with the Halifax account, to achieve the full rate of 2.80%, you will need to be a Halifax current account customer. That said, the Halifax Reward Account is a very competitive current account as it gives you £5 each month you pay in £1,000, whether you’re in credit or overdrawn. So it may be worth switching your current account as well as your savings account.

The ING Savings Account offers a guaranteed interest rate of 2.75% for 12 months. Although this means that after the first year, you'll still need to find a more competitive savings account, it at least provides some reassurance that the interest rate won't drop for that first year. It's effectively a fixed interest rate account with easy access - a rarity these days.

Fix it

If you’d prefer to opt for a fixed rate bond and lock up your savings for a year or more, the Punjab National Bank is offering a 12 month bond at 3.25% (unless you have £1 million to invest, and then the rate rises to 3.50%). Alternatively, the Post Office Growth Bond is offering an interest rate of 3% for one year. You will need a minimum deposit of £500.

If you’re prepared to tie up your funds for longer, the State Bank of India is offering a two year bond at 4%, with a minimum investment of £1,000. And ICICI is offering a three year bond at 4.25%, with a minimum deposit of £1,000.

Remember if you do choose to go for a fixed rate bond, you won’t be able to access your funds for the duration of the term. It’s also a good idea not to fix for too long as interest rates are likely to rise in the near future, and what was initially a competitive account may not be a year later.

So whatever you do, make sure you check how much interest you’re currently earning on your savings. And if you’re not happy, get switching!

More: This account pays 6.3% on your savings – tax-free! | My top seven savings accounts