People who keep thousands of pounds sitting in their current account are being warned that they may be losing out on hundreds of pounds in interest every year.
According to new figures from Yorkshire Building Society, more than 12 million current accounts in the UK are earning 1% interest or less on balances above £5,001, meaning much of that money could be working harder in a savings account.
Earlier research also suggested that around £526 billion is sitting in bank accounts earning little or no interest. As a result, as many as 29 million people may be missing out on around £20 billion a year simply by not moving spare cash into higher-paying savings accounts.
How much interest are savers missing out on?
The difference in returns can be significant.
For example:
- £5,000 in a top easy-access savings account paying around 4.76% interest
could earn roughly £243 a year
But many people are earning far less because the money remains in a current account.
The average UK current account balance is £2,067, and around one in three people has at least £5,000 sitting in theirs.
Experts say this money would typically earn far more if moved into a high-interest savings account.
Why so much money is left sitting in current accounts
Paragon Bank said many people have become what it calls “current account coasters” leaving large balances untouched despite better savings options being available.
Some of the main reasons given include:
- people not getting around to moving their money
- lack of awareness about better interest rates
- concerns about convenience
- wanting quick access to emergency funds
Around:
- 10% of people say they simply haven’t got round to switching
- 11% say they have no particular reason for keeping the money there
- just over 20% keep spare money in their current account as a rainy-day buffer
Banks criticised for low interest & poor incentives
Some high street banks continue to pay very low interest rates on current account balances, despite higher-rate savings products now widely available.
Derek Sprawling from Paragon Bank said:
“High street banks are offering little to no interest on savings while making it unnecessarily difficult to access better alternatives.”
He added that the problem is made worse by customer apathy, with many people failing to review their savings options.
“Millions missing out on easy wins”, warns savings expert
Tina Hughes, director of savings at Yorkshire Building Society, said many households are under pressure yet still not making the most of simple opportunities to boost income.
She said:
“Millions are missing out on easy wins like earning interest on their savings.
For many, that extra income could have covered the cost of Christmas.”
She also encouraged people without savings to consider starting a regular saver, saying it could help avoid relying on credit next year.