Bank account warning for millions as simple mistake could cost you cash – what to check now
MILLIONS of Brits are missing out on billions of pounds worth of extra cash due to a simple mistake.
An eye-watering £255billion is left sitting in seven million bank accounts which pay nothing in interest, according to Skipton Building Society.
But it comes at the same time that these very households could cash in on rates that have hit a 15-year high, according to MoneyFacts.
Those looking to lock money into cash ISAs or bonds lasting for a year or more will now find average rates have risen above 5%.
Based on someone having a £5,000 deposit, Moneyfacts found that, by early September, the average one-year bond had a rate of 5.34%, while the average one-year fixed-rate cash ISA paid 5.19%.
And average easy access account rates and rates on accounts where some notice needs to be given have also hit their highest levels since 2008.
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The average easy access account rate rose to 2.95% in September, reaching its highest point since November 2008.
The average notice account rate rose to 4.04%, breaching 4% for the first time since March 2008.
Maitham Mohsin, head of savings at Skipton Building Society, said: "Current accounts are absolutely essential to running our daily finances, there's no doubt about that, but what they're not great for is your savings.
"Putting your cash in a savings account does not have to mean locking it away without access.
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"There are so many fantastic easy access savings accounts and ISAs that allow people to get to their money instantly and without notice.
"They're no different to a current account in that way, and they’re even easy to open and interact with, so there's no excuse."
Rachel Springall, a finance expert at Moneyfacts, has also warned consumers to "explore the unfamiliar" and look into putting their savings in challenger banks as these offer the "most lucrative returns".
Where can I put my savings?
Last month, the Bank of England increased its base rate by 0.25 percentage points.
It meant a rise from 5% in June to 5.25% in August.
It is also the fourteenth time in a row that the BoE has raised rates since December 2021 when they were at historic lows.
The increase is bad news for borrowers as it makes the cost of mortgages and other loans more expensive.
But it's good news for savers who can get access to better returns and you should check your existing account to make sure it's worthwhile.
Right now, Paragon Bank's easy access account pays savers 5.05% and allows for unlimited withdrawals.
This means that those saving £1,000 in the account would earn £50.50 in interest after 12 months.
But savers could also get a higher rate by locking their cash away in NS&I's 1-Year Guaranteed Growth Bond which pays savers 6.20% back.
This means that those saving £1,000 in the account would earn £62 in interest after 12 months.
The only downside to fixed bond accounts is that you're forced to lock away your cash for a defined period of time.
So it's always worth weighing up to see what's best for you.
How can I find the best savings rates?
With your current rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Visit comparison websites such as MoneyFactsCompare, Go Compare and MoneySupermarket.
These will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
There are five main types of savings accounts, and understanding the differences can help you narrow down the options.
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- Easy-access savings accounts - usually allow unlimited cash withdrawals. However, this perk means they tend to come with lower interest returns.
- Regular savings accounts - generate decent returns but only on the basis that you pay in a set amount each month.
- Notice accounts - offer slightly higher rates than easy-access accounts but you'll need to give advance notice to your bank (up to 95 days) before you can make a withdrawal or you'll forfeit the interest.
- Fixed-rate bonds - these offer some of the highest interest rates. However, if interest rates increase during your term you can't move your money and switch to a better account.
- Individual savings accounts (ISAs) - these can pay high interest but come with high withdrawal fees. But, Lifetime Isas are great for anyone aged 18-39 hoping to buy a house or save for retirement.
A major rule change means banks and building societies have just weeks to tell customers their savings are earning next to no interest.