How to Get the Best Interest Rates on Cash Savings

Finally! Good news for savers: the Bank of England’s key rate has finally increased. The base rate now stands at 0.25%, compared to 0.1%.

While not a massive increase, it can make a difference in the amount of interest your money can earn, especially if you think carefully about where you are holding your savings.

When the government supported National savings and investments announced that it was cutting interest rates in November 2020 to a paltry 0.01%, millions of savers were left devastated and had little incentive to save. The rate rose to 0.015% in November 2021 – but it still results in a pretty paltry return on your money.

For a while, NS&I topped the best savings account charts, but its rate changes forced savers to start looking elsewhere for decent returns.

Basic rule

To get the most out of your savings, you should normally aim for an interest rate above inflation, otherwise your money will simply lose value over time. The current inflation rate (the rate of increase in the prices of goods and services) is 5.1% in November 2021.

This high rate means that it’s impossible to find a savings account that beats inflation right now, but it’s still important to find the best rate possible.

Here’s everything you need to know to find the best savings account for your money.

Use your checking account to save

Most of us use our checking accounts to manage money on a daily basis, but take a closer look and you will see that some checking accounts offer competitive interest rates if you are in credit and deposit a certain amount each. month. :

Nationwide direct flex offers 2% interest on balances up to £ 1,500 and 0.25% on anything over for the first year. After the first 12 months, it’s 0.25% AER variable. You need to deposit at least £ 1000 into the account each month, which can be your salary, for example.

Virgin money offers 2.02% on balances up to £ 1,000.

If you only have around £ 1,000 to £ 1,500 in savings then it makes sense to take advantage of these rates. But there are other accounts you can check out if you’re saving more.

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Linked savings accounts

If you just want to set aside a small amount each month, you may be able to take advantage of some higher rates, depending on where you do your banking. Here are some related savings accounts to consider if you have checking accounts with them:

NatWest has a linked Digital Regular Saver account that pays a maximum rate of 3% on your first £ 1,000. You need to save between £ 1 and £ 50 each month to get this rate, which you do by setting up a standing order through your Natwest checking account.

With First direct, you can earn 1% on balances up to £ 3,600 if you save between £ 25 and £ 300 per month. You need to save for at least 12 months to get the rate and if you save less than £ 300 per month you can carry over the allowance to the next month.

Save for longer

If you’re happy to lock in your money for a year or two and have over £ 1,000 to set aside, fixed rate bonds pay more than standard savings accounts.

Charter Savings Bank is offering 1.51% on balances between £ 1,000 and £ 85,000 if you don’t touch your money for 18 months.

BLME is offering 1.6% for two years on balances between £ 1,000 and £ 1million. BLME is an Islamic bank and pays an “expected rate” rather than “interest” to adhere to Islamic law.

Help to save

We don’t hear enough about the government’s Help to Save program, but if you qualify for the Working Tax Credit or the Universal Low Income Credit, you could receive a 50p bonus every time you save. £ 1 over four years. The maximum amount you can deposit into the account per month is £ 50.

To find out more and see if you are eligible, visit gov.uk.

nsandi cuts interest rates on savings accounts

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Is such that

Anyone over the age of 16 receives an ISA allowance of £ 20,000 – these are savings accounts that are not subject to tax.

You can get two types of ISA: a cash one where you earn interest, or an investment where your money goes to the stock market and has the potential to grow much more.

If you are looking for cash ISAs, the rates are nothing special, but you can earn 0.65% with Paragon Bank and 0.6% with Marcus of Goldman Sachs; both are easily accessible.

If you put your money in an investment account, you could earn around 5-8% in return. If you are investing, you should be prepared to lock in your money for at least five years or more. The idea is that the longer you invest, the more time your money has to grow and weather any downturn in the stock market.

Remember that investments can go up as well as down and you can get back less than what you put in, although experts say that investments historically always outperform saving cash in the long run.

Find a list of ISA providers here.

Things to remember when finding the best savings accounts

Always keep an eye on interest rates as they can change regularly. Look for better rates if this happens.

Make sure your bank is covered by Financial Services Compensation Scheme – which currently protects your money on balances of up to £ 85,000. If you have more than that, don’t put all your money in one place.

If you are opening an investment ISA, check the fees. You should aim to pay no more than 1% in management fees, as they will otherwise eat away at your returns.

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