Over the last decade, comparing savings accounts has felt a little like comparing high street coffee chains or 90s boy band haircuts: if you’d seen one, you’d pretty much seen them all. That’s because the Bank of England has kept its base rate at close to zero since the credit crunch of 2008. So if you’re lucky enough to have savings, chances are you’ve kept them in the same place for some time. After all, why bother switching from one low-interest savings account to another? But with the base rate now rising again – and the cost of living soaring – it’s a good time to start looking around.
As Jonathan Wilson, Senior Proposition Manager at Coventry Building Society explains, “With rates having risen so quickly, it’s worth keeping an eye on how your savings are keeping pace. Savers can now get over 2.00% and maintain access to their savings. And those who can put some savings away for a year or more could be missing out on over £350 per year on a £10,000 savings pot.”
With that in mind, here are four things to think about when shopping around:
1) Decide how much access to your money you need
The savings accounts that offer the highest returns are often those that don’t let you use your money for a specified period – or that limit the number of withdrawals you can make. This can be both a benefit and a drawback. The harder it is to get hold of your savings, the less tempting it is to spend them. On the flip side of the coin, if you unexpectedly need to use a chunk of your cash, you’ll probably be charged a penalty. So be realistic about whether you can put your savings aside for a year or more.
2) Remember that rates often go down over time
Many of the best-paying accounts have rate bonuses which drop off after some time. Or it could be that the interest rate you earn depends on your balance. This means that if you need to take some money out, you might find your account earning far less. Make sure you keep track of how long your rate is going to last. Be ready to switch again when it makes sense to do so.
3) Look at the whole package
A competitive rate is important if you’re looking to squeeze every last drop of interest out of your savings. But think about what else matters to you. Do you want a savings account that isn’t linked to your current account (which might make it easier to avoid dipping into your savings pot)? Would you prefer an online set-up that lets you control your money without ever having to talk to a real person, or do you value being able to speak to a human being in a branch or over the phone? Questions like these will help you find a provider who not only offers a decent rate of return but helps support your wider savings goals and ambitions.
4) Building societies can offer higher rates
Unlike traditional banks, mutual building societies aren’t public companies with shareholders. Instead, they’re owned by the people who save with them, and so their main purpose is to benefit their members. Typically, they pay competitive rates over the long term, rather than offering better deals to new customers. Coventry Building Society treats both new and existing members fairly – no matter whether they have savings of £1 or £1million. So if the hassle of switching savings accounts every few months or years is something you could do without, a building society account could be ideal.
If you’re still deciding whether to shift your savings pot, consider this: stats from the Bank of England show there’s a total of £265.5 billion sitting idly in UK accounts, earning no interest at all. At a rate of even 1.50%, that would translate to an extra £4 billion of interest going to households. The take-home message? Whatever you do, don’t do nothing.