Brits have seen a hit to their incomes and savings due to the economic fallout of the coronavirus pandemic.
Despite this, many have not acted to find a better deal with their bank. Financial services firm Hargreaves Lansdown found that 48% of people said interest rates were too low to be worth bothering with switching bank accounts, 16% said it was too much hassle, and 11% said they probably should switch but couldn’t be bothered.
For some people, the interest rate does not hold much importance. 25% said they wouldn’t switch because they trust their bank, 6% aren’t interested in the rate and 5% are worried something will go wrong.
Given this, the firm has published seven tips to help consumers save.
1. Consider switching accounts
Rates are incredibly low at the moment, but customers can still get 50 times as much interest by switching from a high street account offering 0.01%, to a more competitive bank offering 0.5%. These competitive accounts come closer to matching inflation, helping to protect more of the spending power of your money.
2. Don’t worry about switching more than once
Rates have been falling fast, and there are no guarantees an easy access rate won’t drop. However, if a customer’s new account remains more rewarding than their old one, they have still gained from switching. And there’s nothing stopping them from switching again.
Once customers have three to six months’ worth of essential expenses in an easy access account, they can tie the rest of their savings up for fixed periods, and lock in a rate.
Customers can currently get up to 0.8% by fixing for a year, and can be sure the rate won’t fall in the interim.
3. Don’t think moving accounts is a huge hassle
If customers put the time aside, the process doesn’t have to be complicated. Alternatively, they can use an online savings platform, which makes it easier to keep an eye on the savings rates of all their accounts, and switch between banks with a few clicks.
4. Customers don’t always get rewarded for loyalty
Some customers may feel they will rewarded for being with their bank for decades. According to Hargreaves, while this feels like it should be true, especially when the bank offers ‘special’ savings rates to those with current accounts, in reality, those rates are rarely market-beating, so they may make more from being disloyal.
5. Give online banks a go
Banks have to jump through all sorts of stringent hoops before they’re granted a banking licence in the UK. They need sound financing, a strong business plan and the right people in charge, and online banks are no exception, so it might be worth checking them out
Of course any bank can fail, whether it’s an old high street stalwart or a newer online player, but the first £85,000 customers ($115,175) have with any institution is guaranteed by the Financial Services Compensation Scheme (FSCS).
READ MORE: Two-thirds of Brits still don’t trust online banking
6. Consider an account in a sharia bank
Sharia banks, which follow Islamic guidelines, are often at the top of the best-buy charts, but they’re unfamiliar to many people. Some people are also worried that they offer an expected profit rate, which sounds less reliable than an interest rate.
However, there are some things to bear in mind: If the bank isn’t going to make the expected profit rate, customers have the chance to take their money out immediately with the rate they were expecting.
If something goes wrong with the bank, the first £85,000 of savings is protected in exactly the same way as any other bank, through the FSCS.
The money put in these accounts is invested according to sharia principles, which means it won’t be invested in tobacco, arms or alcohol. It’s one way to take an ethical approach to saving.
7. Don’t put too much importance on bank branches
Customer service doesn’t need a branch, says Hargreaves. Service awards regularly go to banks with online or telephone contact only. Having said that, online banks aren’t guaranteed to have great service either, so check out reviews and ask friends and family about their experiences.
“Savers have been ground down by a decade of misery. It has left millions of people stuck in rock bottom savings accounts with the high street giants: trapped there by the gloomy assumption there’s no point moving anywhere else,” noted Sarah Coles, personal finance analyst at Hargreaves Lansdown.
“We’re driven into the arms of the high street banks by pessimism and faulty assumptions. We need to get to grips with the truth… so we can get back in control of our money,” she added.
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