Rachel Robson reveals five savings accounts you should avoid at all costs.
For the past two months the base rate has been held at 0.5%. Nothing terribly exciting about that, I hear you say.
But in my book, that means it's about time interest rates on savings accounts started to pick up.
Ok, ok, I know - banks and building societies are hardly going to start increasing their savings rates if the base rate hasn't gone up. But I think it's about time the savers among us were given a break. Would that really be such a crime?
Rubbish rates
Unfortunately, judging by the pathetic rates many savings accounts are offering, that's not going to be happening any time soon.
Recent research from Investec Private Bank has revealed that four out of ten savings accounts for balances of £1 are currently paying 0.1% or less in interest. For balances of £5,000, more than a quarter of savings accounts are now paying 0.1% or less, and for balances of £25,000, 22% of accounts are paying 0.1% or less.
Paints a pretty gloomy picture, doesn't it? So much so, that I wouldn't blame you for wondering whether there's any point in saving at all.
Five of the worst
To give you an example of just how bad some savings accounts are, in the chart below, I've highlighted five of the worst instant access savings accounts currently available:
|
Account and provider |
Interest rate (AER) |
Minimum deposit |
|
Cumberland Building Society Cashcard Flexible Access Account |
0% |
£50 (or £1 if under 16) |
|
Laiki Bank Instant Access Account |
0% |
£1 |
|
Bank of Ireland Card Saver Account |
0.001% |
£100 |
|
Newcastle Building Society Nova Plus Account (Issue 3) |
0.01% |
£1 |
|
First Direct Savings Account |
0.05% |
£1 |
That's right. Some of these accounts are paying nothing. Nothing! Zilch! Not a penny! How they dare to call themselves savings accounts, I don't know...
If, like me, you're not feeling tempted by these rates, beware. The list of savings accounts paying such pitiful interest rates goes on and on and on - and when was the last time you checked what your money was earning?
Frankly, if you've got an account paying less than 1%, I recommend you ditch it straightaway. You've got more chance of being rewarded for your saving efforts by stuffing your money under the mattress.
Five of the best
Before I send you further into the depths of despair, I'm going to restore your faith in saving and highlight some of the best instant access savings accounts available. Because believe it or not, it is still possible to get a good return on your savings.
|
Account and provider |
Interest rate (AER) |
Minimum deposit |
Other |
|
2.75% |
£1 |
Includes 12 month fixed bonus of 2.22% |
|
|
Birmingham Midshires Access Reward Account Issue 4 |
2.75% |
£1,000 |
Telephone access only. Only 4 withdrawals permitted in first year. |
|
2.65% |
£500 |
Includes 12 month variable bonus of 1% |
|
|
2.60%* |
£5,000 |
Rate drops to 0.75% you make a withdrawal, or your account falls below £5,000 in the first year |
|
|
2.50% |
£1 |
Includes 12 month variable bonus of 1.25% |
*Interest rate guaranteed to be at least 2% above the Bank of England base rate for 12 months from your account opening date. Apply before 8 June.
In my opinion the ING Direct Savings Accounts knocks the socks off the competition. Not only does it offer an attractive 2.75% interest rate, but it includes a 12 month fixed bonus of 2.22% - so you can be reassured the rate won't drop below this level for the first year at least.
What's more, you'll only need £1 to open the account and there are no penalties for withdrawals. This compares favourably to the Birmingham Midshires account which only allows you to make four withdrawals in the first year. Not exactly what I would call easy access.
The Sainsbury's Finance Internet Saver also comes with a few strings attached. For a start you'll need a fairly hefty sum of £5,000 to open the account. And secondly the interest rate drops to a measly 0.75% if you make a withdrawal in the first year - rubbish!
That said, if you can afford to leave your money untouched for the first year, the interest rate on the account is guaranteed to be at least 2% above the base rate - which is a pretty attractive incentive in the current market. And the account also gets the thumbs up when it comes to consistency.
Don't delay, switch today!
Savings rates are still a long way off from the impressive 6% and 7% we saw a year ago. And many rates out there are simply not worth having at all.
But as I've revealed, it is still possible to get a decent return on your savings if you know where to look. So if you've got any money lurking in a savings account paying a rate of next to nothing, don't put up with it! Switch to a higher paying account today and reap the rewards.
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