Current accounts are a salvation for savers

Spenders and savers alike would no doubt appreciate some kind of reward for staying loyal to their bank or building society, but it’s highly unlikely that they will be able to get a better deal than if they were to switch.

Savers

At a time when savings rates are hitting new lows, consumers who have managed to rustle up a sizeable nest egg have had little to celebrate. In addition, those who are considering putting money aside are starting to lose the confidence to do so – an attitude that was highlighted in a recent study by GfK. This is likely to be a result of the Brexit vote, but at a time of such uncertainty, surely consumers should be encouraged to squirrel money away in case of emergencies?

When such a low-confidence, low-return culture persists, it has a devastating impact on consumers’ willingness to save. However, not all hope is lost in these difficult times, as long as people are willing to look at things from a fresh perspective.

Frustrated savers would do well to turn away from traditional savings accounts and instead start scrutinising their current account. Is it costing them money? Does it have any useful benefits or rewards? And, if it’s not fit for purpose, then why not switch? It only takes up to seven working days to move a current account, thanks to the Switch Service that has been going strong for three years, with over three million people having successfully changed their account.

In fact, if you were to move to an M&S Bank current account using the switching service, you would get a £100 gift card and an additional £10 per month top up, which totals up to £220 in rewards in the first year. Putting this into perspective, that £220 gain on a £2,000 deposit for a saver would mean an interest rate of 11 per cent, which is unheard of.  What’s more, once you become an M&S Bank customer you can access an exclusive regular saver paying a fixed rate of 6 per cent. If you maxed out that regular saver for 12 months, you would save an additional £3,000 and earn £96.63 in interest, so after 12 months of switching and saving you would gain £316.63 on an account with no fee.

Spenders

It’s clear that consumers should be prioritising debts if they are sitting on a poor interest rate on their savings, but this doesn’t mean they should ignore the safety of an emergency fund – they just need to re-think how they spend and save.

Bank customers who take out a NatWest Reward account will be paid 3 per cent for specific direct debits, including council tax, mobile and landline bills, a TV package, water, electricity or gas bill, as well as broadband, all for a £3 monthly fee. In addition, spenders can earn 1 per cent or more at partner retailers each month. Santander also offers up to 3 per cent cashback on its 123 Lite Current Account for a smaller £1 monthly fee, so before committing to a new account it’s always wise to check the bank’s online calculators to see how much you could really earn.

Understandably, not everyone will want to switch their current account, but that doesn’t mean they couldn’t open up an extra account to get a reward. Spenders who frequently use their credit card and pay off their purchases could open a TSB Classic Plus account. Each month spenders receive up to a £5 reward when using the TSB Platinum credit card, which is on top of the reward the Classic Plus account offers for using their debit card. Debit card payments would earn shoppers 5 per cent cashback on up to £100 of contactless payments, or by using Apply Pay or making payments via Android. This means shoppers could earn £120 a year. What’s even better on this account is its attractive savings rate, whereby a maintained balance of £2,000 would earn 5 per cent, which translates to £100 a year. If that’s not enough to entice and there is still some spare cash left to utilise, TSB also offers existing customers a fixed regular saver paying 2 per cent, so if this were to be maxed out, another £60 could be earned in the first year. Therefore, after all of the spending and saving with TSB, it’s possible to get a whopping £280 in free cash in year one.

Needless to say, all of this spending and saving will require careful planning and diligence to ensure the spending, debt repayment and savings are maintained throughout the year, which won’t be possible for everybody. After all, life’s little emergencies can creep up at any time. At least with a current account, you can access your savings straight away, whenever you need it.

Rachel Springall is a Finance Expert at Moneyfacts.co.uk