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Save more online

Martyn Hocking, editor of Which? Money
19/ 5/2008

OUR research shows that online savings accounts consistently come up trumps if you want the best interest rates.

But many members are missing out on these superior deals. A Which? Money survey carried out in January and February found that less than half of the 4,119 members we quizzed had a savings account that was only accessible online.

When asked why they didn't have this type of account, 53 per cent of people said they preferred to speak to someone face to face or on the telephone. The same percentage said they were concerned about internet security.

If you are concerned about the lack of customer service online, this month we publish our first satisfaction ratings for online savings account providers. And if you're still wary about banking online, see `Are security fears stopping you saving online?', below, for the best ways to protect yourself when logging on.

ONLINE WINNERS

If you don't already have one, an online cash Isa is a great way to make your savings grow faster. The advantage of an Isa over an ordinary savings account is that the interest you earn is tax-free (you can save up to £3,600 a year this way).

However, not all Isas are equal - Icesave's Easy Access online Isa, paying 6.1 per cent, is a good bet. Cash Isas that are accessed at a local branch of your bank or building society are typically less attractive.

For example, Alliance & Leicester's pays only 3.4 per cent up to £17,999 and a maximum of 4.25 per cent on larger sums.

If you had £18,000 in Icesave's Best Buy online Isa, you would earn £486 a year more than you would in a Don't Buy branch-based cash Isa from Alliance & Leicester.

If you've got a branch-based easy-access account, you may earn as little as 0.75 per cent interest on balances of £5,000. Switching to a Best Buy online easy-access account could see this rate boosted by 5.75 per cent.

If you had £5,000 in Kaupthing Edge's online easy-access account, you would earn £219 a year more than you would in a Don't Buy such as Halifax/Bank of Scotland's Liquid Gold branch-based account.

Traditionally, tying up your money for longer periods gave you better interest rates, but this is no longer always the case. What is clear is that if you want a notice account, you can get a better deal online than on the high street.

If you had £5,000 in Market Harborough's online notice account, you could earn £157 a year more than you would in Nationwide's branch based Bonus 30 notice account.

FIRST DIRECT, CO-OP AND ICESAVE GET TOP MARKS

You've seen how much you can save by switching to an online savings account, but how user-friendly are they?

New research shows that, on the whole, Which? Money members with an online savings account found it easy to use and were very impressed by the service they received.

However, some providers were clearly better than others. First Direct, the Co-operative Bank and Icesave got the highest scores overall in our survey.

Most other providers rated got good scores, the exceptions being Abbey and Barclays, which only achieved 49 and 50 per cent ratings respectively.

Of the current Which? Money Best Buys for which we have satisfaction data, ICICI Bank, Bradford & Bingley and Icesave all scored well.

None of our Which? Money members felt that accessing their account was particularly difficult

ARE SECURITY FEARS STOPPING YOU SAVING ONLINE?

Which? members say they do not manage their savings online in part because they are worried about internet security.

However, there are measures you can take to protect yourself and reduce the risk of becoming a victim of fraud online.

Your starting point should be making sure that your computer is protected with security software.

Installing a firewall and ensuring that you have adequate anti-virus and anti-spyware protection is vital.

Security `suites' offer a complete security package.

You can buy these bundles from high-street stores or online retailers. Norton Internet Security 2008 (Symantec), £45, is a Which? Computing magazine Best Buy security package, as is ESET Smart Security (£40).

Free security programs are also available. Which? Computing says the best free security programs around include Avira AntiVir Personal Edition Classic (anti-virus), ZoneAlarm Checkpoint (firewall), Defender Microsoft (anti-spyware) and OSpam (anti-spam).

CHECKLIST

1 Use Which? Money Best Buy tables to find the best online savings accounts.

2 If you don't already have one, choose a Best Buy online Isa first - the interest you earn will be tax-free.

3 Keep your money safe online. Make sure you have adequate security in place and be aware of scam emails. Never follow a link from an email saying it's from your bank, use a mix of letters and numbers in passwords to make them harder to crack and report phishing emails to the Association for Payment Clearing Services at reports@banksafeonline.org.uk.

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