One in three keeps most of their money in checking accounts, despite the much better savings rates on offer

New data shows that millions of savers are missing out on interest on their savings because they keep them in checking accounts.

New research from the Building Societies Association shows that three in ten savers keep the majority of their savings in their current account.

For most savers, keeping savings in a bank account is bad news, because they earn little to no interest on it.

Bank of England data shows that £248.9 billion was held in accounts without interest in July.

Even savers who put their savings in their bank’s most basic, easily accessible savings accounts will only earn a paltry return of less than 2 percent.

Figures from interest rate monitor Moneyfacts Compare show that five of the UK’s biggest banks are paying an average interest rate of just 1.64 per cent on £10,000 in savings. That’s 1.44 percentage points less than the market average for an easy-access account.

According to Moneyfacts Compare, the average interest rate for an easy access savings account is 3.08 percent.

Lloyds Bank’s Easy Saver is the worst performer. This option adds just 1.3 per cent to the savings savers save through the Easy Saver deal, or £1.30 for every £100 they save.

HSBC’s Flexible Saver pays 1.98 per cent, while Santander’s Easy-Access Saver pays 1.7 per cent. Barclays’ Everyday Saver pays 1.65 per cent and NatWest’s Flexible Saver pays 1.59 per cent.

If you put £10,000 in a savings account at one of these banks, you’d earn around £165 in interest over a year, according to This is Money’s savings calculator.

For comparison, a saver who puts £10,000 into a good, easy-to-access account with an interest rate of 4.76 per cent would earn around £487 in interest over a year.

That is an interest rate difference of € 322 and it’s a stark warning to savers that loyalty doesn’t always pay off when it comes to where you keep your savings.

According to the BSA, the younger a person is, the more likely he or she is to keep his or her savings in a checking account.

Two out of five savers between the ages of 18 and 34 keep the majority of their savings in their bank account.

But this percentage drops to 28 percent of savers between 35 and 54 years of age and to 16 percent of savers aged 55 and over.

According to savings platform Flagstone, one in six people, or nine million people, does not have any savings account.

With savings rates becoming less attractive than they once were due to falling interest rates, it’s more important than ever to find the best savings accounts to make your money work better.

> Best savings rates: View the best purchase savings tables from This is Money

Rachel Springall, finance expert at Moneyfacts Compare, said: ‘The most flexible accounts from the high street banks pay an average interest rate of 1.64 per cent gross, which is significantly lower than the average market rate of 3.08 per cent gross, based on a deposit of £10,000.

‘This clearly shows why savers need to look beyond the best-known brands, as their loyalty is not being rewarded. It is vital that consumers regularly monitor and change their easy access account to ensure they are earning a decent return.’