Failing to choose best savings account may be costing you £600 a year
Martin Lewis reveals top easy access savings accounts
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Britons are missing out on the best interest rates because they are not making the most of online banks and still think high street banks are safer. People who have £30,000 in savings could be missing out on £628 a year by not investing it in the best easy access savings account, according to latest research.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said people are missing out on hundreds of pounds in interest because they are still wary of online banks.
She said: “We live half our lives online – from doom-scrolling to remote working and streaming – so it’s odd that when it comes to saving, we’re reluctant to move off the high street and into a more rewarding world online.
“It’s not just baffling, it’s also costing us a small fortune in the process – someone with £30,000 of savings could be missing out on £628 a year.
“Fewer than one in ten people have their savings with a new online bank or online savings platform. And it’s not because we’re unaware they offer better rates.”
She continued: “Over a third of us use comparison sites, so we know we could do far better if we shifted off the high street. Instead, we’re put off by common misunderstandings about online savings, so it’s worth getting to grips with the reality.”
Ms Coles said people often think interest rates are too low to bother switching but rates have been creeping up recently.
She added: “When we asked people why they didn’t switch savings account, this was the most common answer – given by almost a third of people (32 percent).
“This may have felt true in recent years, but with online interest rates on the rise, and the high streets creeping up at a glacial pace, there’s a significant gap opening up between the two. The best easy access branch account on the high street offers just 0.75 percent, while the best online is almost four times as much (2.81 percent).”
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The Hargreaves Lansdown study asked savers what the most important thing was when they picked their savings account, and ease topped the list, with 26 percent of people saying it was most important to be able to access their cash without a hassle, and 23 percent saying it was most important to be able to open an account easily.
Ms Coles added: “Now so many branches are closing down, it’s much harder to do this in person. It means people are accessing their cash more online. Once you’ve got to grips with this, it doesn’t matter where your savings are – it’s just as easy to access.
“Customer service doesn’t need a branch. Service awards regularly go to banks with online or telephone contact only. In fact, they may well be easier to get hold of at a time that suits you.
“Having said that, online banks aren’t guaranteed to have great service either, so check out reviews and ask friends and family about their experiences. Make sure you’re also happy with the ways it offers for you to get in touch.”
The online savings myths costing you over £600 a year
- Almost two thirds of people have their savings with a big high street bank (64 percent), and half of people (50 percent) hold them with the same bank as their current account.
- Only one in eight have their money in an online bank or with an online savings platform (13 percent).
- It’s not because they don’t know they could get a better rate of interest online – 36 percent use comparison sites and online savings accounts are usually at the top of the ‘best-buy’ lists.
- But suspicion of newer online accounts is costing people dear. If a person has £30,000 in savings, putting it in the best easy access savings would leave them £628 a year better off than putting it in the best branch account from a high street giant.
Hargreaves Lansdown found the top three expensive savings myths are:
- “Interest rates are too low to bother switching”
- “It’s easier to stay with the same bank as your current account”
- “High street banks are safer”
Meanwhile, Coventry Building Society is offering savers an interest rate of 2.85 percent with its Limited Access Saver.
Someone depositing £1,000 into the account could earn an extra £28.50 worth of interest over the course of one year.
The Limited Access Saver account is a variable account which means the interest rate can go down as well as up during its term.
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