Consumers are losing out on about £4.3 billion a year by letting their savings fester in poor value savings accounts.
Thousands of savers have money sitting in ‘zombie’ accounts, which are closed to new business and typically pay pitiful interest rates. Yet, a recent Which? poll revealed that 35% of people won’t move their savings because they don’t think it would make enough of a difference.
The majority of consumers (75%) believe that banks and building societies don’t do enough to help savers get a good deal, so we’re calling on them to Scrap the Savings Trap and help people make the most of their savings.
Go further: Scrap the Savings Trap – sign our petition and help make it easier to find the best savings deal
In the meantime, here are four steps you can take to prevent your money getting caught in the zombie savings trap.
1. Keep tabs on your interest rate
The interest rate on savings accounts tends to fluctuate in line with the economy as a whole. Banks and building societies are also prone to cutting savings rates once enough new customers have signed up to an account.
Your bank or building society has to make you aware of any changes but does not have to contact you personally, or before the change, unless it results in a “disadvantageous change of a material nature“. If you have a branch-based account, they can do so just by a notice on their website, advertising in the branch and in selected newspapers.
We’re calling for savings account providers to help consumers get the best deal by displaying interest rates prominently and consistently on all statements, annual summaries and online pages. We also want them to improve notifications about the end of bonus rates or fixed terms, and ensure better offers are promoted by staff and in statements.
For now, it’s advisable to keep a constant eye on how much interest your account is paying. Also, don’t forget to note down when your bonus rate expires or fixed rate account matures and switch to a better paying rate to avoid having your savings trapped in a zombie account.
2. Shop around for the best deal
Banks and building societies are always launching new savings accounts with competitive rates in order to attract new customers.
The difference between the average interest paid to savers and the interest they’d earn in an equivalent Best Rate account amounts to £4.3 billion across the whole UK savings market, so it’s worth shopping around for a better deal every few months.
You can keep track of which accounts offer the best rate using our savings account tables which are updated daily.
Go further: Best Rate Savings Accounts – find the best savings account for you
3. Be aware of your options
If you don’t need instant access to your money, you may secure a better interest rate by agreeing to lock up your funds in an account for a fixed period. You could also earn a higher rate of interest by storing funds in an interest-paying current account.
It’s also worth remembering that the limit on how much you can save in a cash Isa is due to increase to £15,000 on 1 July 2014.
We are calling for banks to make switching quicker and stop limiting transfers into new Isas, so it’s easier to make the most of your tax-free allowance.
Go further: Cash Isa Deals of the Week – we’ve scoured the market for the best savings deals
4. Sign our petition
We’re calling on providers to free your savings from the savings trap. You can help by signing our petition and sharing your experiences of the savings market.
Which? executive director, Richard Lloyd, said: ‘With many savers never switching because they don’t think it will make a difference, savings providers should do more to help their customers get the best deal.
‘They need to be clear about interest rates, let people know when bonus rates come to an end and make it easier for people to switch Isas. Banks and building societies must scrap the savings trap and free savers from poor value accounts.’