How sneaky banks are denying you interest on your savings

Banks have been accused of denying savers interest by failing to pass on higher returns to their customers.

Experts have urged customers to shop around as the higher interest rates offered by rival banks have made switching worthwhile again, following years of low returns.

For a decade to the start of last year, a combination of rock-bottom returns and consumer apathy meant that very few savers bothered shopping around. But Anna Bowes, of comparison site Savings Champion, said the market was at a “tipping point” where switching banks could finally start paying again.

Research by the Financial Conduct Authority, the City watchdog, carried out in 2015, found that 80pc of easy-access accounts had not been switched in at least three years.

While it found that confusion among savers was partly to blame, low savings rates across the board meant switching was hardly worth the effort.

However, Bank Rate has soared to 4pc – up from 0.1pc as recently as the end of 2021 – and the average easy-access account now pays 1.55pc, a huge rise from 0.15pc this time last year.

Ms Bowes said: “When the cost of living is rising so much, it’s more important than ever to earn more money on your savings.

“Hopefully we are at a tipping point now where people are realising that they shouldn’t let the banks take their interest.”

However, banks have a number of tricks they employ to skim off our interest, experts said. Here is what to look out for.

Not passing on the rate rise

With Bank Rate rocketing, savers would be forgiven for assuming that the rate on their account would be increased accordingly.

However, this has failed to materialise according to data from Savings Champion.

The average easy-access rate sits at just 1.55pc – a massive 2.45 percentage points below bank rate.

Even the best rate on the market – 3.15pc with Chip – is nearly a percentage point lower than the Bank rate.

And some banks offer even worse. Virgin Money has some accounts that pay as little as 0.25pc.

Requiring opt in for bonus rates

Bonus rates – where providers offer a temporary rate which will reduce after a certain period of time, usually a year – are common when it comes to savings accounts.

However, some banks do not automatically offer these bonuses to their existing customers – instead requiring customers to opt in.

For example, Marcus, the savings provider backed by Goldman Sachs, wrote to customers earlier this year offering a 0.25 percentage point increase in rates.

However, this would not apply automatically, instead customers have to log in to their online account to activate it.

Hiding rate rises from existing customers

Sometimes the rate you receive will depend on exactly when you open an account – with most banks naming accounts accordingly or using different issue numbers to make it easier to navigate.

However, some hide these rate increases behind generic account names, making it harder to quickly identify whether you are receiving the higher rate.

Tesco Bank, for example, calls its easy-access account the “Internet Saver”. A customer opening an account today could expect to receive a rate of 2.9pc.

However, other customers who opened the account in the past could be receiving a much lower rate, despite the account bearing the same name.

Some Sainsbury’s Bank savings customers found their accounts were languishing at just 0.7pc, when they could have been paying out 2.85pc – four times more. This was based on when they opened the account.

Ms Bowes said savers should log in to their accounts to check whether they are on the best rate available and, if they are not, call their bank.

She said: “It’s a matter of logging on to your account and making sure you know what rate you are on. I would definitely encourage savers to call up their bank and ask for a better rate.”

Making it hard to switch internally

Ms Bowes said the simplest way to switch for a better rate is to change to a new account internally at your bank or provider. However, they do not all make it so easy.

Some banks require savers looking to change to a new issue to close their existing account, withdraw the money and then open a new one to pay in to.

She said: “Providers all behave differently. If a provider will make you close your account, then you may as well shop around and look for a better deal somewhere else.”