Tricks to get More from your Cash and the Best Rates

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Do you have a savings account which pays just over 0.05 percent interest a year? If so, then it is time to move.

You can easily squeeze hundreds of pounds of annual interest from your nest egg, without any risk and even if you do not have any savings, then there are rich rewards for making your money work harder.

After nine years of record low-rates, things are finally looking up for the 44 million savers in Britain. Rates have increased, which widens the gap between the best and worst payers.

If you are looking for the best interest rates, then head towards a new bank, as your money is no less safe than with older firms or building societies, rather than traditional high street banks.

It’s here where the rates have increased as big banks are still paying savers, a pittance. Most people tend to open their first savings account with the bank that runs their current account.

However, nearly £9 out of every £10 of cash savings are currently sitting in easy-access accounts. Halifax and Lloyds pay as little as 0.2 percent, HSBC pays only 0.05 percent, and Santander pays 0.25 percent.

Newer banks pay just 1.3 percent, giving you an extra £125 a year on each £10,000.

Anna Bowes, director at advice website Savings Champion, who regularly switches savings accounts, says: ‘Big banks don’t need to pay good rates to retain money.  ‘They rely on savers’ inertia and the fact they are well known. A switch should be straightforward.’

Although Kevin Mountford, chief executive of Raisin UK, which helps new banks raise money from savers, says: ‘Most people rely on the big banks. This is a mistake if you want a good rate of interest.’

Check your rate and move if it’s less than 1 percent and as soon as your fixed-rate deal ends, don’t simply stick with your current provider, as you could easily raise your rate from 0.4 percent fixed for one year to 1.8 percent from new banks.

Rachel Springall, from data, monitors Moneyfacts, says: ‘You might expect any rise in base rate to be passed on in full automatically, but this no longer happens.’

Savers face a huge choice of more than 166 easy-access accounts. Ignore the top payers which limit you to a certain amount of withdrawals, especially if you want to dip into your money at any time.

Some accounts let you withdraw money only once a year, while others only three or six, so this is ideal, for anyone who is prepared to move their money annually.

Before making any rash decisions, as a saver, you should first pay off your most expensive debts. Then you can look for a rainy day fund to cover emergency costs if you have an easy-access account.

Virgin Money Regular Saver pays 2.25 percent on savings between £1 and £250 per month. If you are planning on saving more money, then we suggest looking for top payers such as Ford Money Flexible Saver (1.22 percent) or RCI Bank Freedom Account (1.3 percent).

Justin Modray, of independent advisers Candid Financial Advice, says: ‘As a rule of thumb you need three to six months’ income in an easy-access account, just in case anything untoward happens.’

Under the Financial Services Compensation Scheme (FSCS), up to £85,000 at any one firm is safe in the event of it going bust.

With joint accounts, you can get £170,000 protection, and the limit covers banks and building societies that are registered in the UK, as well as the Swedish bank Ikano.

With RCI, you can get a €100,000 of cover, which exchanges to £89,000 under the French Scheme. Although with National Savings & Investments, 100 percent of your money is guaranteed by the Government.

Once you have saved up enough, be clear of your aims and if you want to keep building up your savings, check to see what your current account offers. For example, First Direct pays 5 percent of £25 to £300 a month. Make sure your savings to a better-paying easy-access account, after the 12 months of your fixed rate account is up.

KEEP SWITCHING TO BEAT BANKS

Often, providers raise rates for new savers, leaving loyal customers with poorer rates. If you are happy to go online, then we recommend switching your nest-egg to a top rate, such as Ford Money’s Flexible Saver, which rates at 1.22 percent. It may not be the top rate saver. However, it will keep up with the general level of savings.

If you don’t want to run your account online, then you can head towards your local building society or smaller banks with branches, such as Virgin Money or Kent Reliance, where you can earn up to 1 percent.

Smaller building societies that pay competitive rates include National Counties at 1.01 percent on its Branch Saver. Although if you don’t live near a branch like Virgin Money and Coventry BS, then top rates such as NS&I (direct saver at 0.95 percent) will let you open an account over the phone.

FIXED RATES ARE WORTH A GAMBLE

If you have a sufficient amount of easy-access money, you can turn to a fixed-rate bond to earn more interest, however only do this if you are sure that you don’t need the money over the period.

Patrick Connolly, of advisers Chase de Vere, says: ‘You need to make sure the difference between a variable and fixed rate is wide enough to make it worthwhile and that you don’t need the money. We don’t know what will happen to interest rates so tie your money up for a maximum of two years.’

The top easy-access rate is currently 1.3 percent, compared to a top one-year fixed-rate of 1.8 percent, which gives you an extra £50 on each £10,000.

New fixed-rates deals can change from time to time, but once you’re locked in, your return shouldn’t change for the duration of your term.

The question for many savers is will they miss out if interest rates rise?

This is unlikely to happen, as your easy-access rate would need to rise by more than one percentage point after six months.

Recently, experts suggest that the Bank of England’s base rate will rise by 0.25 to 0.75 percent in May 2018. Although predicting interest rates can be extremely difficult.

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