While many Brits are struggling to cope with the effects of the credit crunch, the Post Office has revealed that many are failing to make the most of high savings account interest rates. It claims this could be costing people in the UK a collective £8billion.
According to the Post Office, two-thirds of UK savings accounts
pay just three per cent interest or less. These accounts, offering lower rates than the Bank of England base rate, could mean that customers are missing out on billions of pounds in interest compared to those with higher interest accounts.
Director of savings at the Post Office, Richard Norman, said: "It's time savers started to take care of their savings by choosing a home for them wisely - especially in the current economic downturn. There are hundreds of poor paying accounts, so people need to avoid them."
The study points out that with inflation at a four-year high, rocketing food prices and tighter lending conditions, it is particularly important for consumers to ensure their savings account is making the most out of their hard-earned cash.
The Post Office survey showed that customers with an average deposit of £5,000 kept in a savings account paying two per cent could be missing out on up to £188 in interest a year, compared with those with the same amount in the Post Office Instant Saver
, which pays 5.75 per cent. The difference would rise to £440 after three years and more than £725 after five years.
New savings deposits worth £26.4billion were made across the UK in 2007; however, lack of rates awareness is reducing the available benefits. A staggering 30 per cent of savers had no idea what their saving account currently paid in interest. And 39 per cent of savers do not know whether their account provider has changed rates following recent base rate cuts.
Those in the north east were least aware of their savings account interest rates
, with 37 per cent admitting they did not know, while customers in the East Midlands were the most knowledgeable with just 22 per cent proving unaware.
Mr Norman said: "If you don't know what interest you are currently earning, contact your provider. If it is paying a low rate and you want it to earn more then move it. Although it might be tough to put money away at the moment, it is more important than ever to make sure your existing savings work as hard as they can for you.
"Anybody who is looking to open an account needs to check out the interest they will earn, and how easy it will be to access their funds. Our Instant Saver account offers immediate access and includes a guarantee to never be more than 1 per cent below the base rate."
© Fair Investment