New survey finds banks offer better savings rates

If you're looking for a savings account, banks - not building societies - offer the best rates, a new survey has revealed.

The Research Department (TRD), an independent financial services research organisation, found banks offering, on average, half a percent more than building societies on instant access savings accounts.

The research looked at the average savings rates offered by banks and building societies for a ?1,000 investment on different types of account - branch, internet, postal and telephone. All savings plans, whether paying interest annually or monthly were included.

According to TRD, significant differences were found in the average rates for types of account. It found internet accounts paid the most with an average of 5.42%, followed by telephone accounts paying 4.59%, postal accounts paying 3.91% and branch accounts paying 2.66%.

"On the whole, bank accounts offered higher average rates for postal and telephone accounts while mutuals were better for branch and internet accounts. However, because mutuals have so few of either telephone or internet accounts the comparison is not really viable," TRD said.

In their traditional stronghold of branch based accounts, building societies offered an average of 2.77% against 2.48% paid by the banks. But for postal accounts, building societies paid only 3.71% on average compared with 4.03% paid by the banks.

The research also found that 83.5% of building society savers prefer branch accounts compared to just 45.6% in the banking sector, suggesting that building society customers are aware that branch based accounts offer the best value.

The moral of this story is: be aware that rates differ significantly between types of account and whether they reside in banks or building societies, and choose your account accordingly.