Current accounts ‘ better for savers’

TRADITIONAL savings accounts have become redundant as rock- bottom interest rates mean more people are stashing their cash in current accounts, it is claimed.

Research shows the best rates on current accounts are up to three times higher than the top rate offered on regular savings accounts.

As rates on savings plummeted in recent years, banks have launched more competitive current accounts to attract customers – whom they try to tempt into lucrative mortgages and insurance, experts claimed.

According to finance website Moneyfacts, the best current account is with TSB, paying £97.80 annual interest on £2,000 saved. It is more than triple the £28.20 offered by the best easy-access savings account, with Virgin Money, and nearly double the £52.60 on the most competitive fiveyear fixed-rate savings account.

Many people prefer to keep money in a savings account because they cannot access it with a debit card and so are less likely to spend it.

But Rachel Springall, of Moneyfacts.co.uk, said: ‘It wouldn’t be surprising if savers … abandon standard savings accounts altogether.’

She added that current accounts were ‘a salvation for savers in the current low-rate environment’. Com- parison site Moneysupermarket found almost half of savers use a current account for higher interest.

Bank of England figures show average rates on easy-access savings accounts fell from 2.09 per cent to 1.24 per cent between May 2013 and May this year.

Experts partly blamed the Bank’s Funding For Lending scheme which loaned money cheaply to banks, meaning they were less reliant on savers’ cash so did not compete as aggressively to offer low rates.

Website Savingschampion.co.uk said many banks used to insist you could only open a current account if your salary was to be paid into it.

But they have relaxed rules in the past five years after realising they could sell add- on products to current account customers, whose spending habits they can monitor.