5 Savings Myths That Could Be Costing You

online savings

Some people can’t be bothered switching their bank accounts online and it could be costing them dear.

According to research from Opinium Research, two thirds of people have their savings with a big high street bank (64%), and half of people (50%) hold them with the same bank as their current account.

Here are five of the biggest online saving myths:

1) Interest Rates Are Too Low To Bother Switching

When Opinium Research asked people why they didn’t switch savings account, this was the most common answer – given by almost a third of people (32%). This may have felt true in recent years, but with online interest rates on the rise, and the high streets creeping up at a glacial pace, there’s a significant gap opening up between the two. Online offer up to four times as much.

2) It’s Easier To Stay With The Same Bank As Your Current Account

When asked, 26% of people saying it was most important to be able to access their cash without a hassle. In addition, 23% said it was most important to be able to open an account easily.

But the pendulum has swung on ease. Now so many branches are closing down, it’s much harder to do this in person. It means people are accessing their cash more online. Once you’ve got to grips with this, it doesn’t matter where your savings are – it’s just as easy to access. This is particularly the case if you use an online savings platform where you can compare savings rates across a range of fixed-term and easy access products. That way, you’re ensuring your cash work as hard as possible and manage it all in one place.

3) Highstreet Banks Are Safer

When looking for a bank they could trust, people said it’s easier to trust the familiar. However, banks have to jump through all sorts of hoops before they’re granted a banking licence in the UK. They need sound financing, a strong business plan and the right people in charge, and online banks are no exception. They also have the same guarantees in place, so the first £85,000 you have with any institution is guaranteed by the FSCS.

4) You Can’t Get Good Customer Service Without A Branch

Customer service doesn’t need a branch. Service awards regularly go to banks with online or telephone contact only. In fact, they may well be easier to get hold of at a time that suits you. Having said that, online banks aren’t guaranteed to have great service either, so check out reviews and ask friends and family about their experiences. Make sure you’re also happy with the ways it offers for you to get in touch.

5) Sharia Banks Aren’t For Me

Sharia banks are often at the top of the best-buy charts, but they’re unfamiliar to many people. Some wory that they offer an expected profit rate, rather than interest, which sounds less reliable. However, there are two things to bear in mind:

  • If the bank isn’t going to make the expected profit rate, you’ll have the chance to take your money out immediately with the rate you were expecting
  • If something goes wrong with the bank itself, the first £85,000 of your savings is protected in exactly the same way as any other bank, through the FSCS.

Sarah Coles, senior personal finance analyst, at Hargreaves Lansdown said: “We live half our lives online – from doom-scrolling to remote working and streaming – so it’s odd that when it comes to saving, we’re reluctant to move off the high street and into a more rewarding world online. It’s not just baffling, it’s also costing us a small fortune. Someone with £30,000 of savings could be missing out on £628 a year.

“Fewer than one in ten people have their savings with a new online bank, or online savings platform. And it’s not because we’re unaware they offer better rates. Over a third of us use comparison sites, so we know we could do far better if we shifted off the high street. Instead, we’re put off by common misunderstandings about online savings, so it’s worth getting to grips with the reality.”