News broke at the end of last week that the Bank of England was increasing interest rates for the first time in almost a decade. That might be bad news for borrowers, who can expect to pay more interest on their loans, credit cards and mortgages.
However, bad news for borrowers doesn’t automatically mean it’s good news for savers, and if you’re hoarding your money away, you may want to hold off celebrating just yet. While, theoretically, you should see an increase in interest on any money saved, it’s worth remembering that few banks pass on those rate rises to their customers.
As such, now may be the perfect moment to reassess your savings and switch to an account that earns you more. This is what you want to look for when switching any savings account.
Does your bank pass on the interest rates?
This is the first question you need to ask: will you benefit from the interest rate rise? If your bank does alter the interest earned, giving you more on your savings, then you may not actually need to switch accounts. However, it’s more than likely that your bank won’t – after all, they haven’t done so in the recent past. This means, if you want your money to continue working for you, it’s time to ask yourself some hard questions, and begin researching alternative options available to you. Questions like…
Are you in it for the long-term?
There are two types of savers: those looking for a quick buck, and those seeking more long-term investments. So, you need to consider when switching savings accounts, why are you saving in the first place – and, perhaps more pertinently, have your circumstances and needs changed since you last opened one? This will determine the type of savings account you want to get – and that means…
Which savings account is right for you?
There’s a world of difference between a savings account tied to your primary bank account, and one fully focused on savings. As such, depending on why you’re saving (be it a nest egg for the future or just a place to put money away for a holiday), you want to look at your options. ISAs are a great way to save a limited amount, completely tax-free. But it’s not an ideal option if you’ll likely need easy access to your money quickly. More to the point, there are a number of ISA options open, each with different pros and cons. On the other hand, basic savings accounts offered by your high street bank are great if you need short-term savings, but you’ll end up paying tax on your money, and interest rates often aren’t as good as other options. So you’ll want to ask yourself…
Are the interest rates worth it?
In recent times, interest rates on basic savings accounts have been very poor – and there has been very little difference between them; typically they run anywhere between 0.25% and 5%. However, it’s still worth researching the major high street banks, to see if you could get a better deal. Different types of savings accounts offer different rates of interest, with simple ‘online savers’ offering less, while dedicated ‘monthly savers’ or paid-for accounts delivering more.