Millions of people are missing out on the best savings rates because they are unwilling – or unable – to apply for online-only or app-based accounts. Find out how much you could be losing on a poor-performing high street account and consider helping elderly relatives to get online and bag a better deal
If you are computer-savvy, the internet has made managing your personal finances a lot easier. A few minutes on a comparison website can help you shave hundreds, if not thousands, of pounds off your energy, broadband and mortgage bills.
You can also manage your bank and savings accounts online, allowing you to see your balances, transfer money and, in many cases, grab the best possible savings rates.
But, the other, darker, side of the rise of the internet’s influence on personal finances is its effect on those left behind. According to the charity Age UK, nearly four million people aged 65-plus have never used the internet. Meanwhile, others who are internet-savvy may not be comfortable using the web to manage their finances. For these people, comparing deals and getting hold of the best interest rates has got a lot harder over the past two decades.
Those who aren’t online and can’t access comparison tools and websites are left reliant on phoning around, which is time-consuming and will probably mean you’re not guaranteed to get the best deal. Another option is using a broker, but this can cost money, unlike free web searches.
But it’s not just comparing rates where offline savers may become unstuck.
Anna Bowes, director of independent savings advice site Savings Champion, explains: “These days, most of the best savings rates available are online-only accounts, so savers who are not prepared to open and manage their savings online are missing out on valuable interest. And those who stick with their high street banks are likely to be suffering the most, as these providers offer some of the worst rates available.”
| Savings type | Best online rate (AER) | Best alternative rate (AER) offering post/branch/telephone access |
|---|---|---|
| Easy access | RCI Bank – 1.30% | Kent Reliance – 1.21% |
| One-year fixed-rate bond | Wyelands Bank – 1.85% | Al Rayan Bank – 1.85% |
| Two-year fixed-rate bond | Wyelands Bank – 2.15% | Hodge Bank/Close Brothers – 2.05% |
| Three-year fixed-rate bond | RCI Bank – 2.31% | Hodge Bank/Close Brothers – 2.20% |
| Five-year fixed-rate bond | Vanquis Bank/Secure Trust Bank – 2.65% | Close Brothers – 2.60% |
Source: Savings Champion, 13 April 2018
We aren’t just talking about the top few best buy accounts – take a look at a comparison table of all types of savings accounts and most of the top 10 are only available online.
“Having looked at the best buys at the time of writing, eight of the top 10 easy-access accounts are online only, and it’s a similar story for online fixed-rate bonds,” says independent personal finance analyst Andrew Hagger.
Rachel Springall, finance expert at the comparison site Moneyfacts, continues: “Out of the top six deals on one-year fixed-rate bonds, four of them only offer online access, which includes Atom Bank, Ikano Bank, Milestone Savings and OakNorth Bank.
“Clearly, there will be some disgruntled savers learning this fact, as they could earn less interest if they don’t go online to manage their account.”
The reason why banks and building societies offer better rates on their online-only accounts is simple: they are cheaper to run. An online-only account has far lower overheads than an account with branch access, where the costs of running the branch have to be factored in.
Mr Hagger explains: “Part of the reason the products offered are so competitive is that the internet-only channel is far more cost-effective to run, compared with staffing branches and call centres and all the overheads associated with each.”
If you are in a position to do so, choosing online-only savings accounts can boost your nest egg substantially.
“For example, HSBC’s Flexible Saver, which can be opened in branch as well as by telephone and online, pays a paltry 0.05%,” says Mrs Bowes. “However, you could earn up to 1.3% AER with RCI Bank’s Freedom Saver, which can only be opened online.
“On a balance of £50,000 that’s a difference of earning £25 or £650 gross a year.”
At present, the rise of online-only best deals is mainly excluding the older generation who haven’t embraced the internet, but more and more people could become financially excluded as banks and building societies focus on the latest technology. Atom and Tandem are examples of such app-based, digital-only banks.
“The majority of best buy online savings come from the newer financial brands, which seem to be more focused on the smartphone generation,” says Mr Hagger. “Yes, it may be cost-efficient, but at the same time, too many people are being excluded from applying for the best rates.”
If you are comfortable with internet banking, you may want to help someone you know who is missing out on the best interest rates because they don’t bank online.
“My wife and I sorted out an online-only fixed-rate bond for my father-in-law, who is 88 years old,” says Mr Hagger. “We applied for the product while he watched the application process online – the necessary paperwork was then sent to his home address, while the email address we used was my wife’s, so we get emails when the bond is due to mature, for example.
It enables us to keep an eye on things.”
RUTH JACKSON is a journalist specialising in personal finance who writes for national newspapers, magazines and websites
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