New research has emphasised the importance of shopping around for the best savings interest rates.
The data provider, Defaqto, has found that a saver who put £1,000 into the best instant access deposit account three years ago and then transferred the balance to the most competitive account on each anniversary would have earned total interest of £71.73, assuming the interest was left in the account and basic rate tax at 20% is deducted at source.
In comparison leaving the savings in the lowest paying account would have earned interest of just 24 pence, nearly 300 times less.
The research shows the importance of shopping around at the end of the introductory bonus period and not simply sticking with the account when the interest rate inevitably falls.
David Black, Defaqto’s banking specialist, agrees: “This analysis really illustrates the benefits of reviewing your savings account on a regular basis. There are significant benefits in switching your account every year to take advantage of successive accounts offering introductory bonuses.
Black continued: “With such a wide variance in the interest rates, savers should wake up and take advantage of the best offers available rather than paying the price for loyally staying with the same easy access savings account for years.”
Savings accounts with bonus interest rates
The research shows that savers who received the most interest were the ones prepared to take advantage of the bonus interest rates and then move as soon as the introductory rate has been removed.
David Black again: “Typically the highest rates available either have an introductory bonus or a guaranteed minimum rate, so use them and then switch to another such account when the bonus or initial rate period ends as this will significantly boost your returns. But do make sure that you’re aware of, and happy with, any withdrawal restrictions that the account may have.”
Perhaps surprisingly, the research also showed that for those people not wanting to move accounts on a regular basis, it is possible to find accounts paying a consistent and competitive rate of interest.
Defaqto found that savers who chose the best instant access savings account, which did not have an introductory bonus, and stuck with it for the three year period would have received interest of £61.69 on their £1,000 savings.
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