Some current accounts are paying three times as much interest as standard savings accounts, shocking figures from SavingsChampion.co.uk have revealed.
Interest rates on savings accounts have plummeted since the Bank of England dropped its base rate in March 2009 to a record low of 0.5%. Before the credit crisis consumers could be rewarded with an interest rate of up to 8% on a savings bond - but now the best buy easy access savings account is paying just 1.75%.
While interest rates on savings accounts have been on a downward trend, the reverse has been happening for current accounts. In the past couple of years as dissatisfaction with the banking system has grown customers have been voting with their feet and switching their current account provider with more regularity.
As a result, banks and building societies have introduced loyalty schemes and introductory bonuses in order to encourage current account business. This area of the market has quickly matured - so much so that the best paying current account is now offering an interest rate of 5%. Although this yield only applies to the first £2,500 held in the account, it is impossible to match in savings market.
Inflation fell 10 basis points last month to 2.7%, but it remains almost 50% above the Government target rate of 2%. There are only 6 cash ISAs on the market that offer savers a real post-inflation rate of return, and one savings bond.
Anna Bowes, Director of SavingsChampion.co.uk said it was important to take out a savings account which met investors’ needs before considering other cash options.
“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,” she added.
“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.”
