You are here: Home - Saving & Banking - News -

Are you losing money with an easy access savings account?

0
Written by: Emma Lunn
26/06/2019
Experts urge savers to move their cash to higher paying accounts.

According to UK Finance, £654.63bn was sitting in easy access savings accounts in May, up  3 per cent from May 2018, and 8 per cent from May 2017.

During the same period, the sums in fixed rate and notice accounts stalled at £199.65bn – down 3 per cent from May 2018, and 9 per cent from May 2017.

Easy or instant access savings accounts allow you to deposit and withdraw money whenever you like – but interest rates can be very low. The current best rate is 1.50 per cent, but many older accounts pay much less than this, sometimes as little as 0.1 per cent.

Fixed rate and notice accounts require you to tie up your money for a set period of time – but pay higher rates. For example, BLME is currently offering a one-year bond paying 2.2 per cent and a five-year bond paying 2.7 per cent.

When fixed rate accounts mature, the cash is often moved automatically into an easy access account.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Savers are coming to the end of fixed rate deals and letting their money drift into high street easy access accounts instead, where they pay the price of some pretty dismal rates – as low as 0.15 per cent. It’s easy to see why, when there are high street banks offering less than 1 per cent in return for tying your money up for three years: who wants to trade flexibility for 0.85 per cent?

“However, by fighting the drift, looking beyond the high street, and taking control of your savings, you could get 10 times the rate on your easy access account and three times the interest on fixed rate savings.”

Save up a cash buffer

Ideally, everyone should have three to six months’ worth of expenses in an easy access account for emergencies. You can earn more interest on easy access accounts from new banking brands and smaller building societies. For example, Marcus by Goldman Sachs, Virgin Money and Cynergy Bank’s easy access accounts all pay 1.5 per cent AER.

Once you have your safety net in place, it’s worth considering whether you can tie up the rest of your cash savings in fixed rate bonds, in return for more interest.

Laura Suter, personal finance analyst at investment platform AJ Bell, said: “The launch of the Marcus account from Goldman Sachs shook up the sleepy savings market and forced more banks and building societies to up their rates, meaning nine providers are now offering easy access accounts with rates above 1.4 per cent. There’s no doubt that this has helped to draw more savers into the market, and away from fixed-term accounts.

“While the 1.5 per cent rate offered by Marcus, Virgin Money and Cynergy Bank is a boost for anyone holding cash, it’s still below inflation and savers are in the perverse position of rushing to lock in a loss in real terms. That’s fine if you know that you need to access the cash in the short term, but those who are saving for the future could be missing out.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Text to Switch mobile rules will save Brits £325m a year

Mobile users will be able to change network with a single text from 1 July.

Close