MILLIONS of Brits are missing out on up to £1,200 in free cash because they keep their savings in the wrong account.
Over a quarter of adults (28%) keep their earnings in current accounts that pay no interest, according to new findings from the Building Societies Association (BSA).
Most major high street banks do not offer any interest on current account deposits.
There are 24 that do pay interest, according to MoneyFactsCompare, but they pay lower rates than easy access savings accounts meaning people are still missing out.
For example Kroo, an online-only challenger bank, offers a 4.10% interest rate on current account deposits up to £500,000.
However, savers could earn more by moving their money to Cahoot’s top-rate easy-access savings account, which pays 4.85% interest with a minimum deposit of just £1.
If you keep your cash in non-interest accounts, you’ll miss out on hundreds of pounds in interest.
Older savers with larger savings are hit harder, losing out on £1,255 of interest annually.
That’s based on average savings of £25,000 by not putting it away in a top easy-access savings account offering 4.85% interest, according to the BSA.
Younger savers aged 18-24, with smaller average savings of around £7,800, are missing out on £389 annually.
Meanwhile, 25-35 year olds, with average savings of £16,800, miss out on approximately £837 each year.
Younger savers are more likely to keep their money in accounts that offer no interest, the research found – nearly half (47%) of 18-24 year-olds compared to just one in five (21%) of those aged 55-64.
Andrew Gall, head of savings and economics at the BSA, said: “It’s sad to see that so many people who have successfully managed to build a savings pot are missing out on several hundred pounds of interest a year.
“There is a whopping £250 billion sitting in 0% accounts, money that could be providing an income.”
It’s also worth noting that around 14million of us have forgotten bank and building society accounts, with a total of £4.5billion in them, or £321 on average, Gretel estimates.
The My Lost Account service can help you trace them.
Lost accounts are those that have been untouched for 15 years or where mail has been returned as undeliverable.
You can search for a lost account by visiting mylostaccount.org.uk/search.
Advice from Sarah Coles, head of personal finance at Hargreaves Lansdown:
You worked hard to earn it, so now your money should be working just as hard for you.
There’s no excuse for it to be lying around gathering dust in a current account.
It’s easy to fall into the habit of leaving your cash lying dormant in your current account, but this is a terrible idea.
In many cases, you won’t make a penny in interest, so you’re missing out on a huge amount of money.
You can usually make far more interest from an online bank than you can in the same kind of account with one of the high street giants.
A savings comparison site will help you track down the best rates.
If you leave your savings languishing because it feels like too much effort to find an alternative, a cash savings platform might appeal.
You just open one account, then you can switch between accounts with loads of different banks, and see everything in one place.
They have apps, so making the most of your savings is no harder than just shoving it in a current account and missing out on all this interest.
There are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
The rates offered on each of these accounts vary, but we’ve rounded up the best available right now.
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
The best fixed rate currently offered is GB Bank’s Prosper 6 Month Bond, which pays 5.23% (but requires a minimum investment of £20,000).
GB Bank’s Raisin UK – 6 Month Fixed Term Deposit offers 5.03% back to those with less money to save.
This only requires a minimum deposit of £1,000.
If you’re looking for a savings account without withdrawal limitations, then you’ll want to opt for an easy-access saver.
These do what they say on the tin and usually allow for unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
The best easy-access savings account available is from Ulster Bank, which pays 5.2% – but you need to pay a minimum of £5,000 and be a current account customer.
Cahoot’s Simple Saver (Issue 4), offering a 4.85% interest rate, allows savers unlimited withdrawals and requires just a £1 minimum deposit to open the account.
If you want to build a habit of saving a set amount of money each month, a regular savings account could pay dividends.
Principality Building Society’s 6 Month Regular Saver offer 8% interest on savings.
It allows customers to save between £1 and £200 a month.
Save in the maximum, and you’ll earn 27.53 in interest.
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as MoneyFactsCompare and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 2%.
It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.
Savings rates usually rise and fall with the Bank of England‘s base rate.
This was cut for the first time in four years from 5.25% to 5% earlier this month.
And markets are pricing in one further rate cut in 2024.
If forecasts are correct, the base rate could fall to 4.75% by the end of 2024.
That’s bad news for savers, whose rates typically fall when the Bank’s rate is cut.
However, a host of savings accounts allow you to lock your money away on the promise you’re paid a fixed interest rate for a defined period.
Fixed bonds, can be a useful bet to help ride out future cuts to the base rate.
