When was the last time you checked the interest rate on your bank accounts?
As someone who works in the financial sector this is something that has to be ingrained in my DNA. In fact, I’m not just checking my interest rates, I want to check your interest rates too.
I’m basically giving you a friendly reminder that now is the time to review your accounts.
The reason I’m acting like the interest rate police is due to a recent report from the Bank of England. The report revealed deposits into accounts with 0% interest rose to £2.1 billion in June, after seven months of net withdrawals. This means there are billions of pounds sitting in accounts earning no interest.
The report was bleak reading, as it shows that we have less savings and many people are missing out on the opportunity of earning more money due to using low interest accounts.
Therefore, if you are suddenly realising that your money is sitting in a 0% account, now is the time to move it.
Last week, the Bank of England increased the base rate to 5.25% in a continued attempt to battle inflation. This should be good news for savers, as we should start to see higher interest rates across all savings accounts.
Interest rates on savings accounts have been increasing slowly, but many banks have chosen not to increase their rates in line with the base rate. This should start to change, as banking watchdog the FCA has released an action plan to increase rates and hold banks to account.
With this in mind, we should start to see interest rates rising across the board, including on instant and easy access accounts.
The reason I’m highlighting this type of savings account is because it is the perfect product for anyone that has some savings in a 0% current account.
Instant access has similar flexibility to a current account, as you can normally withdraw and deposit at a time that suits you.
And the good news? You’ll also be earning a bit of extra money from your savings as interest rates on instant access have risen to 5%.
Tandem Instant Access Savings Account offers 24/7 access to your funds and no fees or charges, with a variable interest rate of 4.65% with a variable top up rate of 0.35%. This means you can earn up to 5% interest on your savings.
Alternatively, Paragon Double Access Account has unlimited deposits and a variable interest rate of 4.75%, but if you make more than two withdrawals a year the interest rate drops to 1.50%. This is why it’s always important to read all the terms and conditions before opening a savings account.
Both these accounts are worth exploring if you currently have money in a 0% interest account. For example, if a basic-rate taxpayer kept £1,000 in the Paragon account mentioned above, they could earn £48 (before tax) in a year.
This sum might feel small, but it is still much better than earning nothing in a 0% account.
So, today’s the day - there’s never been a better time to switch accounts and start saving.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.