Do you know what interest rate you're getting on your savings?
Or, to ask another question, when was the last time you checked what interest rate you're getting?
When you open a new savings account, chances are it's because you've been lured in by a great rate. But once you've had that account for a while – sometimes for as little as a year – that great rate could disappear.
You might expect that your continued loyalty would be rewarded, but unfortunately, that's not always the case. If you don't regularly undertake a savings review you could find that your interest rate has shrunk to a measly 0.10% - or lower!
There are three reasons why we don't move our nest eggs to the best savings rates:
Banks and building societies love your loyalty - or lack of motivation to go elsewhere. It means that they can price your interest rate much lower than they do for new savers. They can then concentrate their efforts on trying to net those new savers like precious butterflies, while you sit locked and dried in a display draw!
Maybe we expect more of our banks and building societies than we do of other types of businesses. But they make the most money, as businesses, by making just enough effort to keep your business – and not one bit more.
Conducting a regular savings review at least once a year is the only way to ensure you're not taken advantage of. After all, it can mean the difference between receiving 0.10% and 2.50%+ on your money – and you want the best savings rates, don't you?
Fixed rate savings bonds Fixed rate bonds are great because you know what return you're going to get on your money over a specified period. But what happens when that fixed rate period ends?
If you think that your bank or building society will automatically house your nest egg in a high interest savings account, you will probably find yourself sadly mistaken! Chances are they'll keep your cash but will transfer you to a new account at a lower rate, and you may not even realise.
Savings accounts with bonuses We all like the feeling of getting something extra, but If your account comes with a short-term bonus, it may be a significant amount of the overall interest rate.
When that bonus ends (you've guessed it), your rate will drop considerably. Like with fixed rate accounts, if you don't review your rate you could be left with paltry returns without even realising it.
New rules are currently being consulted on that could force banks to clearly communicate when your bonus rate or fixed term is about to expire, but until then, it's important to be proactive and regularly check the rate you're receiving – ideally, at least once a year, or potentially more often if you're on an easy access deal.
Cash ISAs A popular misconception is that Individual Savings Accounts (ISAs) will always give you the best return for your money.
A cash ISA is a fantastic way to shield your money from the taxman – but only if it continues to give you a competitive rate. In order to continue getting the best return you need to keep one beady eye on your current ISA rate, and the other on the ISA market to ensure you are still getting a good deal.
From April 2016, basic rate taxpayers can earn up to £1,000 in interest, tax-free, per year. So the tax benefits of an ISA are not as valuable as they once were, unless you have a large amount of savings. It may pay you to move out of low-performing ISAs into other savings vehicles, without paying more tax.
It can happen! You know you have a savings account, but don't know where…
Well help is at hand! Trace your lost account free of charge at mylostaccount.org.uk.
And keep a better eye on them next time!
Reviewing your savings doesn't need to be a lot of work.
Set a reminder on your phone, your computer or put a note on your calendar, so that when a fixed rate or bonus period ends you are prepared to review your savings.
If you haven't checked your savings rate for a while, find out what it is! Check your bank or building society's website for the current rate of interest, go in branch or give them a call.
If your account isn't paying you the best rate of interest, it's time to move on.
Use tools like our Best Buys and savings search to find the best savings rates currently on offer.
Finally, remember that your new provider is likely to be no saint either. Keep an eye on the rate and be ready to review again once any bonus or fixed rate period ends.
Compare savings accounts Search all savings accounts More savings guides
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.