Warning for 31million bank customers losing more than £350 a year for leaving cash in zombie accounts
More than 31million bank customers have £186billion in savings accounts earning just 1.5% interest, according to Paragon Bank's app Spring.
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These accounts generate £2.3billion a year in interest, but savers could earn over three times more by switching to accounts offering up to 5% interest, The Sun can reveal.
The average bank customer has around £10,000 in savings, according to Raisin.
If that £10,000 is kept in an easy access account earning 1.5% interest, it would generate just £150 in interest each year.
But switching to Chase's 5% easy access account would boost that to £500, earning you an extra £350.
Experts specifically warn that using savings linked to current accounts often means low rates, restrictions, and losing value to inflation.
Derek Sprawling, managing director of Spring, said: "Too many savers are leaving their money with their current account provider's linked savings accounts.
"Simply sticking with a savings account offered by their current account provider often means an array of restrictions, such as tiered rates or withdrawal limits, on top of poor rates.
"There are other options for savers, it is possible to get a rewarding rate of return without sacrificing access to their money or wading through a host of restrictive terms and conditions."
If your savings account pays less than the current inflation rate of 3.4%, it's time to look for a better deal.
Plus, the Bank of England is expected to cut its base rate soon, which could make savings rates even lower.
The base rate affects how much banks pay savers - when it drops, interest on savings usually goes down too.
Financial markets expect the Bank to reduce rates at its next meeting in August, and again to 3.75% before the end of the year.
How this affects your savings depends on the type of account you have.
Fixed-rate accounts won't change, but easy-access accounts can see their rates drop at any time.
What types of savings accounts are available?
THERE are four types of savings accounts: fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we've rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don't lock your cash away for as long as a typical fixed bond account.
You'll need to give advance notice to your bank - up to 180 days in some cases - before you can make a withdrawal or you'll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You'll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.
To help you get the best returns, we've listed the top savings rates for each account type below.
What's on offer?
If you're looking for a savings account without withdrawal limitations, then you'll want to opt for an easy-access saver.
These do what they say on the tin and usually allow for unlimited cash withdrawals.
The best easy access savings account available is from Atom Bank, which pays 5% - and you only need to pay a minimum of £1 to set it up.
This means that if you were to save £1,000 in this account, you would earn £50 a year in interest.
However, this rate is only for new customers and includes a 2.25% bonus for the first 12 months.
Meanwhile, Snoop's easy access saver offers customers 4.6% back on savings worth £1 or more.
If you're okay with being less flexible about withdrawals, a top notice account could be a great option.
These accounts offer better rates than easy-access accounts but still let you access your money more flexibly than a a fixed-bond.
Plum's 95-day notice account offers savers 4.84% back with a minimum £1 deposit, for example.
This means that if you were to save £1,000 in this account, you would earn £48.40 a year in interest.
Oxbury Bank's 120-day notice account offers 4.6%, requiring a minimum deposit of £1,000.
If you want to lock your money away and keep the same savings rate for a set time, a fixed bond is a good choice.
The best fixed rate currently offered is GB Bank's one-year fixed bond, which pays 4.58%, requiring a minimum deposit of £1,000.
Meanwhile, Marcus by Goldman Sachs's one-year fixed bond offers 4.55% back on a deposit of £1 or more.
This means that if you were to save £1,000 in this account, you would earn £45.50 a year in interest.
If you want to build a habit of saving a set amount of money each month, a regular savings account could pay you dividends.
Principality Building Society's Six Month Regular Saver offers 7.5% interest on savings.
It allows customers to save between £1 and £200 a month.
Save in the maximum, and you'll earn 25.81 in interest.
While regular savings accounts look attractive due to the high interest rates on offer, they are not right for all savers.
You can't use a regular savings account to earn interest on a lump sum.
The amount you can save into the account each month will be limited, typically to somewhere between £200 and £500.
Therefore, if you have more to save, it would be wise to consider one of the other accounts mentioned above.
How can I find the best savings rates?
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as Compare the Market, Go.Compare and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you'll want to consider any account that currently pays more interest than the current level of inflation - 3.4%.
It's always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you're saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.
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