Savers could be missing out on £billons in interest by not switching. Almost all adults in the UK (93%) have a cash savings account, but with many put off switching accounts because of the expected hassle and low perceived gain, 80% of easy access accounts have not been switched in the last three years**.
By being active and switching accounts, savers with £10,000 in an easy access account paying 0.05% could earn an extra £125 gross interest a year - now who would not want that extra cash?
So, what’s stopping you from switching? Opening a new account is definitely less onerous than it used to be and with just a few things that you should consider prior to switching, the pros certainly outweigh the cons.
What should you consider prior to switching?
1. Check the small print on your existing savings account
If your existing account is easy access, you can simply provide your instruction to close the account and details of where to pay your money.
Depending on the type of account you hold, this can be done via internet banking, the telephone, in branch or by post.
However, some savings accounts require 30, 60 or 90 days notice to withdraw funds, which applies to closing the account too and others may penalise you for an early exit, if this is even allowed at all.
2. Decide which type of savings account is best suited to your needs
This can be done by a process of elimination. So, for example - do you need access to your savings, so you can get at your money quickly without penalty or can you afford to lock your money away? Normally the longer you can lock your money away for, the higher the rate you get.
Do you have a lump sum to invest or are you going to be saving regularly?
If you have a lump sum that is over £85,000, then you need to consider opening more than one account to ensure your money is protected by the Financial Services Compensation Scheme (FSCS). For more information on the FSCS protection read our guide.
Have you used your cash ISA allowance? Even though many savers will no longer pay tax on their savings since the Personal Savings Allowance (PSA) was introduced, for others cash ISAs are an important tool for keeping their savings as tax efficient as possible.
- Read our article - Should I bother with an ISA – for more food for thought
3. Are you happy to manage your account online or via a mobile app?
Today, many of the better rates have to be managed online. If you are happy with this, great, if not make sure you check that you can open and operate your new account via your preferred method, for example post or telephone.
4. Check our best buy tables for the type of savings account you require
Not all best buy tables are the same. Some tables will highlight accounts from providers which pay them a fee. Our tables are completely unbiased and independent. Accounts are included because they are genuinely what we consider to be best buys, regardless of whether a provider incentivises their accounts.
5. Make sure you are aware of the terms and conditions
Banks and building societies have become increasingly sophisticated over the years, introducing a range of ploys that make their accounts more competitive and elevate them to the top of the best buy tables. For the canny saver, these features can be a great way of squeezing out as much interest as possible, but for others they can be an expensive trap.
For example, some savings accounts, while they allow withdrawals, put a restriction on the number you can make each year without a penalty.
- Read our article Beware the Tricks of the Trade to get a better idea of what to look out for.
6. Identification for anti money laundering purposes
Once you've made your choice, to open the new account you will need to prove who you are and where you live, due to anti money laundering regulations. Most providers will now check you out electronically via the electoral roll and your current account, so there is no need to send a copy of your driving licence, utility bills and/or bank statements as identification.
However, if you don't pass the electronic checks, you will have to do things the old-fashioned way and send paper proof.
The documents you have to submit may differ between providers and often they will need to be certified by a professional.
Once again, who is allowed to certify your documents will vary from provider to provider and it’s important to get it right, otherwise your account will not be opened and you’ll have to start again!
7. When the account is opened, pay in your savings and start planning what you will spend your extra interest on.
Remember, in order to ensure that you continue to earn the maximum interest on your savings, you need to remain active and review your savings accounts on a regular basis.
Keep an eye on the best buy rates and diarise when your current rate ends, so that you can be prepared with the next market-leading rate to move your savings into.
Using our Rate Tracker service will allow you to view all your accounts and the rates you are earning in one place and enable you to keep up-to-date with the best rates around to ensure you know when you should switch.
If you need some guidance on which account is right for you, please call our savings experts on 0800 321 3581 who would be happy to help.
A free guide designed to help you cut through the complexity and maximise the benefits of using ISAs to your advantage.
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