Rip-off savings accounts exposed – and where to put your money instead

As times grow even tougher for cash-strapped households, we reveal the worst places to keep your savings.

With inflation at 3.8% and expected to rise later in the year, holding your cash in an account that pays below this amount means that your nest egg is haemorrhaging in value.

The good news is there are a lot of savings accounts out there that will to keep your savings ahead of this vital point. 

The bad news is that many banks out there are offering derisory savings accounts to their customers, paying as little as 0.5% (more on this later). 

In this article, I'll highlight some of the worst offenders and show you where you should be putting your money instead.

The true cost

And let’s be clear: this isn’t just about chasing an extra few quid.

Take the example of someone with £20,000 in savings: the difference between earning 1% and 4.5% could represent up to £700 a year.

In this article, I look at some of the least competitive rates on the market – and explore troubling pieces of small print on seemingly attractive deals.

NS&I’s 1% embarrassment

The first entrant on our list may come as a surprise to some of our regular readers, as we often write about the fun of lottery-style accounts.

While NS&I has long been hailed as the “nation’s favourite” account, it appears there is more to the story as we head further into 2025, with savers often losing out.

Take NS&I’s postal-only Investment Account – at present, it pays an abysmal 1% to more than a million customers.

In certain cases, investors have more than £100,000 languishing in these accounts.

The true cost of stagnation

But why are people so keen when rates are low? The uncomfortable truth is that NS&I is relying on inertia.

The body knows many of its savers won’t switch, because they’ve been there for decades.

In some cases, this lost interest could total thousands of pounds.

Easy access: easy money (for them, not you)

But what if we look beyond Government-backed initiatives?

Worryingly, it seems that NS&I is just the tip of the iceberg, with many so-called “easy access” accounts paying below 1%.

The worst offenders

In one of the most shocking examples I uncovered, TSB pays an abysmal 0.5% for instant access on its Save Well account.

Likewise, Punjab National Bank offers savers just 0.75%

And although we have historically been huge fans of First Direct’s current account at loveMONEY, thanks to its strong record for customer service, we were surprised to see that its Everyday Saver quietly limps along near the bottom of the charts.

As of 20 October, it will pay just 1.15% on deposits from £1, which is well below what you can earn elsewhere.

If you have money languishing in one of these accounts, you're missing out on huge sums of interest and, obviously, falling well behind inflation. 

To illustrate this point, if you held £20,000 in the TSB Save Well account, you would earn just £100 interest over the course of a year. 

Had you put that in the best-paying access account (more on that shortly) instead, you'd earn £950 in interest, a difference of £850.

Where your money should be

So, what are the alternatives?

Luckily, there are still ways to make your savings pay, with many of the market leaders coming from the digital world.

Easy access: up to 4.75%

If you may need to dip into your cash in an emergency, app-based bank Chase could be your best bet.

It pays 4.75% for one year, although it includes a 2.25% bonus for the first 12 months.

As a result, you should be prepared to move your money when the time comes.

Alternatively, Cahoot (part of Santander) offers 4.4% on deposits of up to £500,000.

Notice accounts: up to 4.54%

Do you have a little more room for manoeuvre when it comes to accessing your cash?

Notice accounts require you to give warning – typically 30, 60 or 90 days – before withdrawing your money.

In return for sacrificing instant access, these accounts usually pay a higher interest rate than standard easy-access accounts.

At present, agricultural bank Oxbury leads with 4.54% on its 120-day product.

Fixed terms: up to 4.41%

Fixed-term accounts allow you to lock your money away for a set period – often six months, a year, or longer – at a guaranteed interest rate.

These usually pay more than easy-access accounts, but you can’t withdraw your cash early without penalties.

At the moment, Oxbury pays 4.41% for six months and Chetwood offers 4.5% for one year.

As we highlighted in this earlier article, it is possible to earn a higher rate provided you have a £10,000 savings pot. 

Savings platform Raisin is currently offering a £100 boost to anyone opening an account and depositing £10,000 into one of its fixed-term savings accounts (offer ends 30 September).

You can learn more about how to qualify here.

In effect, this will give a 1% boost to your returns on a £10,000 pot.

The best rate available on the platform at the time of writing is 4.35% from AlRayan Bank, meaning you can effectively earn 5.35% on your savings.

So, where does this leave us?

Here’s the truth: banks keep paying us rates in the region of 1% because too many of us passively accept this situation.

Every day you leave your cash dwindling on an insulting rate, you’re effectively tipping your bank for ripping you off.

Do you have experience of particularly poor interest rates?

Has this impacted your overall financial health and how you look for better deals?

We’d love to hear your thoughts in the comments below.