Ditch these 'best buy' savings accounts - quick!

If you took out one of these best-buy easy access savings accounts, be careful: you may find it's now one of the worst accounts in town...

If you opened up a brand new easy access variable rate savings account last year with a competitive rate of interest, you might think you would still be earning a decent rate of interest today.

But there's a good chance you'd be wrong.

For me, over the past few months, there's been nothing more depressing than watching the interest on my savings account rapidly head towards zero. But this can be particularly infuriating when you went to great lengths to take out a market-leading account a year ago, only to find that it is now one of the worst.

The trouble is, keeping track of the interest rate on your savings account isn't easy. Unfortunately, under the Banking Code, in many situations, banks do not have to personally notify customers about changes to their savings rates. Instead, they can simply place an advertisement in their branches or in newspapers - which means, let's face it, it is easy to miss.

The sinners

So let's take a look at which banks/building societies have cut their rates the most severely over the past year:

Source: Moneyfacts 16/07/09

As you can see, the average interest rate has fallen from 5.61% a year ago, to an utterly pathetic 0.77% today. That's a reduction of 4.84% in the past year. Rubbish!

FirstSave is clearly the worst offender, having offered a very competitive rate of 6.26% a year ago, but now only offering a measly 0.75% - a whopping 5.51% difference. However, the prize for offering the lowest rate goes to Derbyshire Building Society which is offering an appalling 0.25% on its Derby Rams account - not really worth bothering with, is it?

Changing rates

If I asked you what interest rate you were currently earning on your savings, chances are you wouldn't know. As I said earlier, banks and building societies can be very sneaky when it comes to informing their customers of rate changes.

But finding out how much interest you're earning on your savings can be extra tricky when the account you have is no longer being offered to new customers - and therefore no longer advertised.

To find out exactly how much interest you're earning you'll either need to visit the branch and wait in line, call your provider and wait on hold, or weave your way through a complicated maze on the bank/building society's website.

I say complicated but it should be relatively straightforward. All you should need to do is locate the page on the website which lists all the interest rates for savings accounts - both those that are still available, and those that are no longer on sale for new customers.

But although this sounds easy, it can often take a long time to find. In fact, it took me about 20 minutes to find the closed accounts section on the Alliance & Leicester website - certainly tried my patience, I can tell you!

So to give you a helping hand, and save you from the depths of despair, the following chart highlights exactly where to look for savings rates for eight of the major lenders.

Better options

Using the above chart, you'll be able to find out what rate of interest your savings are currently earning. But how do you know whether this rate is competitive or not? With the base rate so low, you'd be forgiven for assuming a rubbish rate of return is all you can expect right now.

To give you some idea, let's take a look at some of the current best buys for easy access savings accounts:

As you can see, the highest rate you can currently achieve on your easy access savings account is 3.15%. So if you're not currently earning anything close to 3%, I'd say it's definitely time to switch!

It's worth noting that almost all of the accounts in the chart above offer a bonus for the first 12 months. However, the Alliance and Leicester Online Saver Issue 5 Account is the only one to offer a variable rate bonus, so it could change at any time.

The only account not to offer a bonus, and my personal favourite, is the ING Direct Savings Account. The entire interest rate on this account is fixed at 3% for the first year, so you're guaranteed to get that rate for 12 months - very unusual for an easy access account. And there are absolutely no withdrawal penalties whatsoever on the account.

So if you're not happy with your savings rate, don't put up and shut up - switch to a better savings account today!

More: Get a better rate on your fixed-rate savings  | How to choose a savings account