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The internet has become so central to modern life that many people can't think of functioning without it, but there's one aspect of the digital sphere that can still leave people cold – online banking. Whether it's fear of fraudulent activity, concerns about the spate of high-profile IT scandals or simply the fear of the unknown, many savers still prefer to bank with a high street name than head online, yet doing so could leave them hundreds of pounds worse off.
It's all to do with interest rates. It's becoming increasingly apparent that the rates on offer from high street names typically pale in comparison to those from online banks, with research from Hargreaves Lansdown finding that competitive online savings accounts can earn you more than twice as much interest as the best branch-based equivalent.
For example, the best high street branch rate for a one-year bond comes in at just 1% (from Nationwide), yet our own Best Buys show that the best online rate clocks in at 2.05% (from BLME), which could leave you with £106 more interest after the year on a £10,000 investment, simply by heading to an online challenger.
The difference becomes even more significant when looking at longer terms: the best online rate for a two-year deal (from Al Rayan Bank) stands at 2.32%, well above Barclays' 1.21% and equating to £229 in additional interest over the two-year term, while for a five-year bond, it's possible to get a rate of 2.70% from Close Brothers Savings, BLME and Ikano Bank, compared with 1.75% from Nationwide, equating to £530 extra over the term.
Some of these accounts can only be opened and operated online, and there's a growing trend for accounts (and banks) that can purely be managed by mobile app, such as Atom Bank. The same applies with easy access accounts, with our own research showing that some of the best deals are online-exclusive.
This includes new bank Marcus by Goldman Sachs, with its Online Savings Account offering the market-leading rate of 1.50%, while Virgin Money's internet-operated range of E-Savers pay the next-best rate of 1.42%. In comparison, TSB offers an easy access rate of just 0.50% for those who want to open an account in branch, with many similar deals from high street banks paying little more than base rate.
Given the potential interest boost – and the resulting financial benefits – on offer from online deals, it makes sense to consider them, yet some savers still need to be convinced. Indeed, although ONS figures show that 90% of households in Great Britain have internet access and the same proportion regularly use the internet, only 69% of people bank online. This shows that there's still work to do to highlight the merits of online banking, and it's hoped that Get Online Week, which this year runs from 15-21 October and is encouraging people to #try1thing, will do just that.
"20 years ago fewer than one in 10 of us had an internet connection: now nine out of 10 do," said Sarah Coles, personal finance analyst at Hargreaves Lansdown. "Yet millions are missing out. Some 4.5m people have never used the internet, and even those who do could be getting so much more out of it … If you try online banking it could help you get to grips with your finances, [and] if you save online with one of the newer internet banks, you could end up hundreds of pounds better off."
So why not give online deals a go? Challenger banks may not be as well known as high street names, but they still have the same kind of financial protection, so all you've got to lose is your fear of the unknown. Check out our Best Buys to find the best deals – most of which are internet-operated – and see if it's time to embrace digital banking.
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