Savings rates aren’t doing incredibly well right now, but you can still do well if you’re savvy about how you save.
We’ve got a few tips to help you boost that savings pot.
It might sound obvious but shopping around is still the best way to make a little extra return on your savings. For example, at the moment HSBC is the UK’s biggest bank in terms of how much money it holds in accounts, but its best savings rate for a two-year fix is just 0.65%.
Check the best buy tables and you’ll find the best rate on a two-year fixed rate bond is 2.11%, paid by Al Rayan Bank. On £5,000 that amounts to a £150 difference over two years.
[Read more: Real rate of return – how to calculate how much your savings are really worth]
Don’t be scared of the unknown
These days a lot of the best savings rates are offered by banks you may not have heard of such as Al Rayan, BLME, Vanquis and Shawbrook. These are either challenger banks who are fairly new to the market or small banks that are offering tempting rates in an attempt to grow.
If a bank is a member of the Financial Service Compensation Scheme, that is a good sign it is reputable. It is that means your money – up to a limit of £85,000 – is protected in the event the bank goes bust.
Many of the top-paying accounts are also now offered by Sharia banks. These are banks that work according to Islamic rules, which prohibit the payment of interest in return for lending or accepting money.
This means money you give them doesn’t earn interest instead it is invested in Sharia-compliant activities to generate a profit that is shared between you and the bank.
Check if loyalty pays
When you are looking for a savings account, check if your current account provider offers any special rates to existing customers. Some, including First Direct and Nationwide, offer higher rates to loyal customers so you could find you get a better deal this way.
For example, First Direct has an exclusive regular saver that pays 5%, but is only available to their current account holders.
Take a look at app-based banks
The newest banks are only available via apps on your phone, but due to their low overheads are offering some stonking savings rates. For example, Atom Bank regularly tops the best buy tables with its savings accounts paying up to 2.4% at present.
If you are looking for a home for a relatively small amount it could be your best option as it is the only bank in the top tables for fixed-rate accounts at the moment that allows minimum deposits of £50.
Drip feed for bigger rewards
If you only have a small amount to save, take a look at regular savings accounts. These offer big interest rates but limit you to only paying in relatively small amounts each month. This can be a hugely rewarding way to build up a nest egg.
For example, First Direct, Marks & Spencer Bank and Nationwide all offer their current account customers regular savings accounts paying 5% interest.
The best regular saver not linked to a current account is from Saffron Building Society and pays 3.5%.
Look beyond savings accounts
The best interest rates on offer at the moment are not on savings accounts, several current accounts offer far more. Nationwide’s FlexDirect account pays 5% on up to £2,500 for 12 months and Tesco Bank pays 3% interest on balances up to £3,000.
To get the interest you have to meet minimum monthly funding requirements and set up direct debits but it could well be worth the hassle.
[Read more: Why savers should be more optimistic]
Banks are eager to grab new current account customers so regularly offer cash rewards if you switch to them. Move around regularly and the amount you’ll earn will easily eclipse the interest your savings are earning.
For example, Halifax currently is offering £125 if you switch to the Reward Current Account or Ultimate Reward Current Account (offer ends 31 July); First Direct is paying £100 on its 1st Account; and M&S Bank is offering a £185 gift card when you switch and stay on the M&S Current Account and the M&S Premium Current Account for 12 months.