Is your bank shorting your saver rate?
Traditional banks. They just don’t get it …
A few weeks back we mentioned that there’s scant love between banks and customers, and the failure to match savings rates with current interest rates is just the latest offence.
Think about it. We should love our bank. They turn our money into more money. They lend to us so we can level up in life; so we can start businesses and buy houses, cars, weddings, and holidays.
But it’s just so hard to love someone when they treat you like this … when it’s one-way traffic. When it’s illogical, unfair and distant.
Savings rates could be sky high but many traditional banks aren’t playing ball. It’s a good thing they’re not the only game in town …
Rates and revulsion
MoneySavingExpert is a good place (though not the only one) to compare and review savings account rates at a given moment – and this data comes directly from there.
NB not all savings accounts are the same (we’ve more detail on that) so here we’ll look at fixed rate accounts, which normally come with minimum deposit levels and minimum terms, during which time withdrawals cannot be made.
Still and all, several providers, from NS&I to OakNorth Bank, offer fixed rate accounts at or above 6%, while at a traditional bank you’ll be lucky to land above 5%.
In fact on any list of Top 10 rates, traditional banks are generally notable only by their absence. As you read a few weeks ago, UK banks challenger banks’ customer satisfaction levels are way above the old guard as they seem to do things fairer, cheaper, faster, nicer.
Back to basics
Savings accounts, more or less, have one job to do: to safely grow our money.
Concerning, then, BSA research found almost that almost a quarter (23%) of Britons don’t check the interest rate before opening an account, and a third (33%) fail to compare interest rates between other accounts.
More alarming, Bank of England data shows that, in August 2022, there was almost £280 billion sitting in UK accounts that pay no interest at all.
Much of this is needless. We have resources to compare and contrast. And for the longest time, switching banks and bank accounts was a cumbersome, longwinded and difficult process – often by design.
But these days it’s not … it’s a knife through butter.
Saving and investing
This has so far been about savings accounts, but we should say again that cash accounts are designed to grow money in the short-term – they’re not the optimal option long term.
Cash accounts, though very safe, still mostly lag behind inflation and a recent note from Schroders reminds us that investing is still the primary way to swell your pot long term.
Analysing investment data over 100 years, during which there have been plenty of struggles and strife, Schroders note that investments (in companies big and small) are the performance leaders, while cash and government bonds lag well behind. This has been true year after decade after generation.
Just sayin’.
Time to explore
Investing is a massive topic and we cover bits of it here, here, here and in more depth in the Money Means book.
But back to banks and we can’t tell you to ditch yours once and for all … we can only recommend that you compare what’s out there and bear in mind that your savings account has one job to do.
A goldfish grows bigger in a 6.2-foot tank than a 4.3 one. Nuff said.