If you've seen the bonus rate on your savings account or ISA run out - or it's due to in the weeks ahead - then now is the time to find a new home for your nest-egg.
The number of savings account with bonus - or introductory - rates in the best-buy tables has rocketed over the past few years, as providers look to ‘hook’ new customers into deals that would otherwise not be all that competitive.
The size of bonuses on offer have also increased. According to moneysupermaket.com, the average bonus rate is currently 1.93%, compared to 0.71% two years ago.
However, you could double the return cash with a bonus rate at the moment. For example, Birmingham Midshires has a telephone savings account paying 3.15% including a bonus of 2.65% for the first 12 months, while Egg's internet savings account pays 3.25% AER, including a 2% bonus for the first year.
While opting for an account with a bonus may boost the earnings you make on your savings, it won’t last forever. The danger for many savers is that they forget to review their savings on a regular basis, and risk their money ending up in a deal paying next to nothing.
The internet savings account from Egg is a good example – after just 12 months, the interest you’ll earn on your money will revert to 1.25% AER. When you consider that the top instant access account currently pays 3.3% (Coventry Building Society) this is far from competitive.
Kevin Mountford, head of banking at moneysupermarket.com, says: "Savings rates are highly inflated at the moment because banks and building societies are still desperate for our cash. But savers who take out bonus rate savings deals should also take note of when the bonus ends and be prepared to switch accounts once this happens.
That’s not to say you should discount savings accounts with a bonus introductory rate.
“A really savvy saver can use bonuses to significantly boost their returns as long as they are willing to put in a little effort," says Mountford.
Coventry Building Society has a good bonus deal on offer at the moment. Its postal instant access account pays 3.3% AER on balances between £1,000 and £250,000, and includes a 1.3% bonus for the first year. Bear in mind, though, that you can only make four penalty-free withdrawals a year, and these must be at least £1,000.
What if you bonus has expired?
People who opened a savings account last year may have already noticed their interest rate drop. It this is the situation facing you at the moment then now is the time to take action.
Moneysupermarket.com estimates that savers who invested £3,000 in a top-paying savings account would have earned an average of £92.85 in interest in year one, but by leaving their money where it is this will fall dramatically to just £33.63.
The comparison website estimates that nearly half of all savers have never changed their saving account and nearly a third have never checked their savings rate.
Don’t let banks and building societies benefit from your inertia – especially as loyalty rarely pays off.
David Black, banking specialist at data provider Defaqto, explains: “Anyone who has had the same variable-rate savings account for a while can almost certainly get a better deal by transferring their funds to a new account.”
Black warns that banks and building societies are putting all their efforts into attracting funds from new customers, rather than their existing savers, and are therefore reserving the best deals for people who have never saved with them before.
While this is bad news, it does present an opportunity – by moving your money you can take advantage of the demand for fresh funds.
“Savers need to wake up to what’s happening and get a better return on their funds by proactively jettisoning loyalty as it simply isn’t paying,” Black adds.
You can find the best savings rates on the market – for fixed, instant access and regular deals – in Moneywise’s daily round-up of the savings market.