Take advantage of the pseudo savings accounts?

With the new rules reducing the time it takes to switch your current account coming into force, savers could bolster the interest they can earn, in a high interest-paying current account, plus they may also have access to some exclusive savings accounts.

At the moment, the best paying current account is offering 5% AER, albeit only on balances of up to £2,500 but that is still almost three times as much interest than you can currently earn on the best buy easy access savings account which is paying just 1.75%.

Of course there are disadvantages to using a current account as a savings account because they can be very restrictive; restrictive on the amount you can deposit, restrictive due to the account conditions you must abide by to benefit from the higher interest rates – and some even come with a monthly fee. 

Anna Bowes, Director of SavingsChampion.co.uk says “It’s always important to take out a savings account which meets your needs, rather than making your needs fit your savings. However, if you are looking to get some of the best rates on the market and are willing to switch your current account, one of these may be appropriate and offer a boost to your savings to boot.  Although this isn’t always the simplest way to increase the amount of interest you can earn, it’s certainly a savvy way, and in the current climate with most savings accounts paying less than inflation, it could be worth the hassle”

In addition to the extra interest that can be earned on some current accounts, there are also some accounts restricted to existing current account customers or for those who are willing to move their current account.  Many of these pay headline grabbing rates of interest, including the First Direct Regular Saver and the M&S Monthly Saver both paying 6%. However, as they normally have a low maximum monthly deposit (about £300), the overall amount of interest earned may actually be small – and the benefit could be negated by any monthly fees applicable.

Anna continues “Savvy savers will utilise all the weapons in their armoury from cash ISAs to high interest current accounts and regular savings accounts, in order to cream as much extra interest as possible. Saving in the current environment isn’t easy and being complacent can cost you dearly so it’s worth juggling your money and considering the best paying accounts you can find”

Inflation reduction is a damp squib

The recent reduction in the UK annual inflation rate is of little to no help to struggling savers. Although the rate of inflation (CPI) fell to 2.70% in August down from 2.80% in July, this has only added a meagre three more ISAs into the mix of accounts that match or beat inflation for taxpayers. See The Stats Bank for more information, but there are now six ISAs and just one fixed rate bond for basic rate taxpayers – and this is fixed for a whopping seven years.