Given that the Bank of England has set a base rates of just 0.5%, it can be difficult for savers to achieve a decent return. Regardless of whether you are seeking for a variable or fixed rate on your online savings, there are more effective ways of investing your money. Here are some tips and advice for selecting a savings account.
Why do savings rates matter?
Inflation You need a high savings interest rate to keep ahead of inflation. Despite the economic downturn, the Bank of England is struggling to keep inflation under control. If consumer prices rise faster than your savings, then your money is losing value in real terms. Retired If you are retired and are trying to get by on a fixed income, your interest savings rate is particularly important. A few years ago, savers were easily able to enjoy a return of 7%, but now it is hard to even find a return of 3%. Future plans You may have plans for the future, such as buying your first house or going on a trip around the world. This will affect you whether you keep your money in an easy access account, or tie up your funds to get the best savings interest rate.
How to get a better savings rate
Current vs notice accounts As per a general rule, locking up your money for longer is likely to yield a higher rate of interest. However, withdrawing your funds earlier will mean that you have to pay for an early redemption fee. Branch vs internet accounts It costs a lot of money to administrate accounts at branch level, so it's hardly surprising to find that internet banks are prepared to offer a higher rate of return. For example, ING Direct currently offers customers 3% of interest rate and an instant access. Look elsewhere Don't rely on your bank to keep you informed. If your money is in a current account yielding just 0.1%, they are making more money. New customers tend to be offered better deals. Price comparison websites If you want to identify the best savings interest rate, you can use a price comparison site. This will enable you to trawl the market for the most competitive deals. You will be told about accounts which are offered by building societies which you have never even heard about.