Savers have been warned that they should look online for the best interest rates rather than going into high street branches, as most providers keep their best rates for those browsing the web.
Those hoping to earn a decent rate of interest on their savings have found that the top branch-based accounts are offering as much as 0.5 per cent less interest than their online equivalents, which are offering up to 3 per cent.
The gap between online and offline rates has grown even more this year in the wake of online-only providers upping their rates.
For example, after the Treasury-backed National Savings & Investments boosted the rate on its online and telephone-based Direct Saver account to 2.85 per cent, many online providers pushed their rates past 3 per cent.
Today, the best easy access account rate is offered by Yorkshire Building Society, which pays 3.35 per cent, followed by Chip at 3.15 per cent and Shawbrook Bank at 3.06 per cent, according to Moneyfacts. All of these can only be applied for online.
The average of the top five online accounts is 3.04 per cent, up from 0.7 per cent in December 2021. Meanwhile, the best branch accounts now pay an average 2.5 per cent, up from 0.4 per cent in December 2021.
On a typical savings pot of £10,000, a 3.04 per cent rate will pay savers £304 of interest over the course of a year, compared to £250, marking a premium of £56 for online savers.
For one high street bank, the difference between saving online or opening an account in branch could cost savers a £210 penalty.
HSBC offers one of the most generous rates of all the high street banks on an instant access account of 3 per cent – though this rate is only available online, and only on balances of up to £10,000.
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If you go into a branch of HSBC, the best you will be offered is 0.9 per cent – or just £90, compared to the online rate of £300.
Anna Bowes, co-founder of Savings Champion, says that those who prefer to open and manage their savings in “more traditional ways” are losing out.
“That said, there are still some providers that are paying decent rates and you can open by post or in branch – you do not have to depend on the poor rates that your high street bank will be offering,” she adds.
Those looking for a fixed-rate bond may find that opening an account via post will prove difficult, Bowes notes, with only three of the top 30 accounts accessible by mail.
Of these, the top performer is The Access Bank which pays 4.1 per cent, while Al Rayan’s market-leading account pays 4.31 per cent. On a deposit of £50,000, you would miss out on £105 gross interest.
Why is there a difference between online and offline rates?
The main reason that so many bank accounts are now internet-based is that they are relatively cheap for providers to run.
An online account does not incur many of the overheads associated with branch-based and postal accounts, such as paying to rent a high street location, paying for energy or paying additional taxes such as business rates.
Consumer behaviour is also changing, as more people than ever before are comfortable using the internet to manage their finances.
The chief executive of HSBC, Ian Stewart, recently suggested that 98 per cent of the bank’s transactions in December were “digital”. Other banking chiefs have suggested that customers are making similar moves towards online banking.
Since 2015, banks have stopped running more than 5,000 branches around the UK – 53 per cent of all branches – according to analysis by consumer group Which?. Some 662 were closed last year alone and more are planned for this year.
