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In principle, people are never likely to oppose the idea of earning more interest on their savings account. With bank interest rates at disappointingly low levels, more and more people are looking at ways they may be able to boost the amount they earn from saved funds.
There are a number of ways you may be able to achieve better interest rates on your savings. Some of the most readily-available include:
Switching Accounts
One of the simplest ways to make sure you always get the best interest rates is to switch accounts regularly, and this approach is becoming increasingly popular. There is no single bank that consistently offers the best rates of interest, and if you’ve held your account for a year or more there is a good chance that things have changed and you could now find a better deal elsewhere. Furthermore, regular switching allows you to take advantage of rewards and new customer deals – not technically interest, but definitely a significant boost to the returns you get on your money.
High-Interest Current Accounts
High-interest current accounts can actually offer better interest than most savings accounts – albeit only for a limited amount of money. They also provide greater flexibility, giving you ready access to your money through your debit card, cheques and online payments as with any current account. If you can meet the funding requirements (which can be done by transferring the same funds into first one account then another), you can open multiple high-interest current accounts with different banks in order to maximise the amount you can save this way.
Tie Your Money Up
Often, the best-paying savings accounts are those that require you to tie your money up for a while. In return for committing your money to the bank for a certain number of years, you receive better interest rates. This option is obviously not suitable for those who may need to access their money before the term ends or are generally unhappy losing access to their money. In many cases, you don’t lose access to your money altogether but rather pay a penalty for early withdrawal. When this is the case, you may get better rates from putting your money in a five year account and withdrawing after two than for simply signing up for a two year account.
Consider Alternative ISAs
Alternatives to cash ISAs can pay better, but this usually comes with increased risk. At present, the main alternative is a stocks and shares ISA. This can potentially pay significantly better, but comes with definite increased risk and you may lose money. If you are not confident with choosing investments yourself, you can purchase a ready-made ISA designed for a risk level you are happy with, but remember that the stock market is volatile and even the most cautious ISAs could potentially lose money. Soon, peer-to-peer lending will soon also become eligible for ISA status, and is significantly less risky than stocks and shares but may still be higher-risk than a cash ISA.
