Should I swap savings accounts for the best interest rate?

​It’s kind of an understood thing that savings rates don’t really pay much. But is it worthwhile swapping saving rates / accounts regularly to get the best possible rate?

Let’s have a look and see.

Should I bounce from Account to Account?
Technically speaking, yes. It’s always better to get paid interest by the banks, and the more you get the better. Easy answer, right?

But, can you be arsed? And is it really worth it?

So at the moment (October 2019) a quick search of the best possible rates indicates that for an instant access account, you can get are between 1.45% (Coventry Building Society) and 1.75% (Newbury Building Society - existing customers only). For longer-term fixed periods, you can maybe get closer to 2.1%.

If you’re reading this some other month, then the above might be out of date, but the principles don’t change. So keep reading my wee saving jumping whores.

First of all, you need to decide what type of account you open. Dunno your options? Here they are;

Instant Access
No prizes for how long you have to wait to get access to the money kept in one of these accounts.

It’s instant. In case you were wondering

But because you’re not giving the banks long enough to do anything with your money, they aren’t going to give you much interest on it. So expect the shittest rates possible here. But they’ll still usually be better than a current account.

TIP:
If you don’t have a savings account and just let the money build up in your current account, then get a savings account. It won’t be much extra money, but it’s better than nothing, right?

Notice Accounts
With these accounts, you have to give notice to the bank when you want your money back. Now that’s not to say you can’t get your money back as soon as you want it, but there will probably be a penalty of losing any interest you had earned by taking it out sooner.

Notice accounts can be anything from 30 days up to 2 years. The longer you’re willing to let the bank play with your money, the more interest they’ll give you.

But don’t expect them to be that generous. Banks make a lot of money. They do that by not paying you much interest!

TIP:
If you have a lump sum of money that you know you’re going to need within a relatively short timeframe, i.e. under 2 years, then these accounts allow you to generally keep up with inflation. So maybe it’s a future tax bill, house purchase, something like that.

Savings Bond / Fixed Rate Bond
A savings bond isn’t like a normal savings account, but it acts very similarly to the Notice Accounts. So fixed rate of interest over a fixed time period, and if you pull your money out early, you’re gonna get spanked.

Financially speaking. Probably not literally.

TIP:
See the last one above, and repeat it to yourself.


Which should I go for?
Whichever you want. Personally other than a few occasions when people are squirrelling money away for a tax bill, then I don’t really like notice accounts. For the difference, less than 0.5% a year interest, I prefer to have the option of getting access to my money when I want it.

Is it worth jumping about? It depends how much money you have in savings. Let’s say you have £10,000 set aside. The difference between the best 2 year fixed bond and instant access is going to be around £5.42 a month.

When it comes to the difference between any old savings account and the best rate… it’s likely to be more like £4 a month (0.5% difference).

So you’ve got to ask yourself is it worth it? The more you’ve got, the more worthwhile it is to change every so often.

I would probably go with a savings account with a building society (who usually pay the most consistently high-interest rates) and check-in once a year to see if it’s still vaguely near the top of the table.

Once you’re over say £20,000 of savings, you’ll probably want to start looking at other options for where to keep your cash savings anyway.

At that level it's worth taking the time to plan any future expenditure, and maximising the return you'll be getting.


Or.... Option 2
Just throwing this in as another option to consider… I personally quite like Premium Bonds from NS&I. They are a bit like notice accounts, but the other way around. It usually takes a month or so for your money to be put into the draw for any return. But, the plus side is you can get your money instantly when you do need it.

The other good thing is its a tax-free return. So the headline rate of 1.4% interest can be the equivalent of a lot more if you're a higher rate tax payer.

Conclusion
It's technically worth changing savings accounts every time there's a better deal to be had. But you've got to keep in mind the time it'll take you to do it and how much extra you'll earn from doing it.

If you're happy with that 'hourly rate' then go nuts. Have at it.

Otherwise, stick with a good savings account and just make sure it's vaguely in line with what the best rates available are each year.