This content originally appeared in the MSE weekly email on 22 July 2015.
Savings rates are dismal and while the Bank of England governor Mark Carney last week said the 0.5% base rate could rise in winter, you should act now to double, treble or even quadruple the interest you earn.
Banks don't need our cash as they get it from the Funding for Lending Scheme, so they don't pay rates that attract it. Even the very top easy-access savings account from BM Savings only pays 1.6% AER variable and most people earn less than 1%. So if you really want to make your cash work for you, you have to get clever...
- New. 2.4% tax-free cash ISA with access.
A cash ISA is just a savings account where you don't pay tax on the interest. You can put £15,240 in per tax year and it stays tax-free every year. Easy access accounts let you withdraw cash whenever you want – the top payer's Virgin Money at 1.51% (max three withdrawals/year) – but we've a trick to beat it:
The new Coventry BS ISA is fixed till May 2020 (for new money and transfers) and pays 2.4%. Yet it allows you to withdraw the cash early by closing the account, and losing 120 days' interest. Even if you'd closed it after a year you'd have got 1.61%, better than the top easy-access deal. You'd get more by leaving it longer. Full info: Top Cash ISAs.
- Make your bank account pay you up to 5%.
A raft of accounts pay higher in-credit interest than top savings. These loss-leaders aim to suck people into switching, but there's no reason not to take advantage:
– For bigger savers, Santander 123* pays 3% AER variable on £3,000 to £20,000. Other banks pay higher rates, but as you can save more in it, Santander can pay up to £592/year interest (pre-tax). It has a £2/month fee, but for most that's easily covered as it pays cashback on direct debits, eg, 3% on mobiles, 2% energy and 1% water.
– For smaller sums, TSB Classic Plus* pays 5% AER (4% after basic tax, 3% higher) on up to £2,000, plus get £100 if you switch via our link. Full info including eligibility criteria and more top payers in Best Bank Accounts.
- Earn 6% if you save every month.
New customers to no.1 customer service bank First Direct* get £100 to switch (if they pay in a minimum £1,000/month – equivalent £13,200/year salary), and all customers get access to a linked 6% fixed-rate regular saver where you can save £25-£300/month for a year. M&S is similar (it gives new M&S Bank Account* switchers a £100 M&S gift card). If you don't want to switch current account, anyone can save £50-£250/month in Leeds BS's 3.05%. Full info in Top Regular Savings.