My friends have so far looked at me sideways when I have explained that I plan on moving my money around every year, chasing the very best savings rates. They consider doing so an extreme waste of time as “the banks only screw you over anyway” and that a few percentage points make zero difference.

A few percentage points make ALL the difference. For a little bit of effort (generally about 2 hours a year), you can earn hundreds or thousands of pounds worth of extra interest, than if you left your money in the same place on an institutions Standard Variable savings account.

Don’t believe me? Let me show you. For the sake of argument, let us say I have £10,000 to save, and I am looking to put it in an account somewhere and let it build over time.

My Barclays Tracker Saver account pays 0.10% interest on balances over £50. It calculates daily and compounds monthly. After 12 months in those conditions, my savings would have grown by just £10. The bank has paid me just £10 to lend them my £10,000 for the entire year.

Daylight robbery.

Let’s open a new account with ING Direct instead. At the time of writing, they are guaranteeing new customers 3.20% under similar conditions otherwise to barclays, i.e. compounding monthly. For my £10,000 they will pay me £324.74 in interest. That is much better. But now my introductory offer has expired, I’ve dropped onto their Standard Variable saving rate of 0.50%. If I don’t move my money, how will it fair next year?

If I am lazy (and the bank hopes so), next year they will pay me just £51.74 in interest.

More than 6 times less than they paid last year.

Instead, when my introductory offer ran out with ING I moved my money to another introductory offer paying (for the sake of argument) 4%. Remember I have £10,324.74 to move courtesy of the 3.2% interest from ING last year, so I move that sum to a new Halifax account.

12 months later I now have £10,745.39. And after another move the next year that paid 4.5%, I have £11,239.03!

In 3 years the amount of savings I had has grown by £1,239.03 because of 2 hours work opening a new account and closing an old one each year. By the time you’ve run out of places to consider opening an account as a new customer, ING Direct have forgotten about you and you qualify as a new customer again.

If I had not chased the good rates and left it languishing in my original Barclays account, I’d have earned a paltry £30.04 over those 3 years. If I had not moved it out of ING when the first introductory offer ended, I’d have earned £103.74 in total.

By chasing the higher rate and moving my money every year, I would end up with £1,239.03 in interest alone.

If you have more to save then your returns will be even better.

Banks are relying on you being complacent with your money in the longer term. You can beat them at their own game with just a few hours work each year. Is rate chasing worth the time and effort annually? In my opinion you’re mad not to. It’s free money for minimal work on your part.

Are you a chaser,or is it all just a waste of time in your view?

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A few weeks ago I decided to start looking into savings accounts properly. For the first time in 5 years, I will soon – I hope – actually have money to save after seriously paying down debt. If I’m totally honest, I was completely at a loss where to turn for advice, so I engaged myself on a rate finding mission. The credit crunch has brought the Bank of England base interest rate to its lowest since records began – yet there are still good products out there if you don’t mind rate chasing after the introductory offers run out. I’m not adverse to doing this, as it’s a small amount of effort for potentially, hundreds of pounds of profit a year.

After weeks of research, I’ve concluded and personally recommend the following:

Instant Access Savings - ING Direct are by far the best provider right now in terms of rates and flexibility. They are offering 3.2% AER (3.16%) on their standard savings account with no limits on access. After the initial 12 month period, the rate drops to an appalling 0.5% which effectively makes it a BoE base rate tracker. However for those initial 12 months, you’ll be doing well with ample time to reassess nearer the end of the introductory offer. Their online interface is amazing, and it makes it nice and simple to sub-divide your ‘account’ into pots for specific things.

One word of caution however: Don’t be fooled by their claim you can have an account open “in about 10 minutes”! It might take 10 minutes to fill in the online paperwork, but it takes many weeks to get it activated and ready for use! Believe it or not, this includes snail-mailing a bank cheque (cheques? I had to order a new cheque book just for this! How antiquated… but worth the effort).

If you’re not keen on ING, or want a better raw rate, consider Egg: They’re offering 3.25% again fixed for the first 12 months but with slightly less ‘zing’ in their interface. Egg are part of the Citigroup of companies.

Regular Savings Account – This is basically a product that gives you an incentive to save every month, usually from £25 to £500 a month. If you don’t make a deposit, then you get penalised for that month. If you’re able to keep it up for the year though, they can pay really well. Right now Halifax are offering 5% and win hands down against the competition.

Cash Mini ISAs – Finally, no savings roundup would be complete without mentioning ISAs. If you don’t have one this year, there is still plenty of time. It’s a tax-free way of saving, and at the moment the best rate seems to be the Barclays Golden ISA, paying 2.58% AER. If you’re new to saving like me, then fill your cash ISA first! It’s tax free and a great way to ensure the government doesn’t start pinching your hard earned pennies. Each ISA can hold £3,600 of cold hard cash, and you get a new one each year.

Most banks are paying around much the same rate at the moment, so to keep things simple check your own bank before moving elsewhere. For the sake of a few percentage points, it’s probably not worth the hassle of transferring any you have right now.

Found better rates? Tell the world in the comments!

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