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Savings Accounts

Recent research carried out by experts in the financial sector has found that customers of savings accounts that use passbooks are paying a premium for these, in the form of lower rates of interest for their savings.

Passbook style savings accounts were found to be offering on average 1.1 percent less interest than comparable instant access accounts that rely on annual accounts and Internet access.

The reason behind this disparity in the interest rates between these similar accounts is the cost to the banks and building societies in providing the passbooks and the associated processing. While having the passbook does give savers a better sense of security for their money, the premium for this perceived increase in safety comes at a fairly large cost. Over the course of a year, the difference in interest earned on £1000 in a passbook savings account could be as much as £50 less than a comparable instant access account.

If you are looking for the best interest rates for your savings, and you want an instant access account, then your best option will be one of the online products. These tend to offer the best rates, as they are less costly to run and are more profitable for the operator, which is why so many banks and building societies are promoting their online services so heavily.

There are many benefits to the online approach, as well as having good rates of interest, they are easy to use, and you can manage your savings from the comfort of your own home, or from anywhere that has Internet access.

The research showed that the top five easy access savings accounts that offer passbooks offered an average of 4.16 per cent, while the overall top five instant access accounts have interest rates averaging 5.29 per cent. It’s not often that you can get something for nothing, but simply ditching your passbook and switching to an online account without one will see you benefit from more interest paid to you each year, if you still have a passbook account, now may well be the time to change.