Halloween is almost upon us, and that means there could be plenty of scares in store – particularly for those who don't keep track of their savings rates.
According to research from RateSetter, around 41% of UK savers aren't aware of the interest rate on their savings account, and even more worryingly, one in five people have no savings account at all. Even those who are aware of their rate may not be much better off, with one-third of those earning less than 1% in interest.
The research also highlighted the particular problem of so-called "zombie accounts": each of the UK's five largest banks offer at least one savings account that pays 0.5% or less, while others offer respectable teaser rates that then fall substantially after the first year.
This is the unfortunate side effect of the bonus account. Many easy access deals offer rates that initially seem highly appealing, but because a substantial part of that is made up of a bonus, the rate will drop significantly after the (typically 12-month) bonus period.
"It is in banks' interests to pay the lowest rates they can competitively get away with, so it's not surprising that zombie accounts with pitifully low rates are gnawing away at the UK's savings," said Rhydian Lewis, CEO at RateSetter.
"However, savers needn't feel trapped by the high street zombies. There are now several different ways for savers and investors to make sure they get the most for their money, so it's important that people check the interest rate they're getting, go online and shop around."
This, really, is the key to beating the savings zombies. It's vital to check your deal on a regular basis, particularly if you've got a variable rate account or you initially signed up to a bonus deal, because there's a chance you could be earning less than you were expecting.
If that's the case, your savings simply won't have the chance to build up, but you don't have to stand for it – if you're not getting the rate you should, compare the options and switch! You could easily lose out if you don't, and unless you're on a fixed rate deal that'll penalise you for closing the account, there's nothing to stop you from voting with your feet.
There's another alternative, of course, and that's to opt for a different savings vehicle altogether. What about a stocks & shares ISA? These accounts are inherently riskier than their cash-based counterparts as you're actively investing in the stock market, but while there's the chance you may get out less than you put in, there's also the potential to get higher returns.
"We believe that calculated risks are both necessary and acceptable for investors to earn zombie-beating returns, and it appears that this is becoming a more widely held view," added Rhydian, so if you're comfortable with a greater element of risk, make sure to find out more about stocks & shares ISAs (or similar vehicles) to see if they're worth considering.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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