Maximum amount of money you should keep in your current account as most people unaware
You could be losing out on money by keeping too much in your current account, experts have revealed.
Many people have accounts of one of a few types, a current account, a savings account, maybe an investment account or ISA if you are trying to plan more for the future.
Each of these serves a particular need, and if you're not using them for their intended purposes, for example by keeping large amounts in your current account, you could be losing out.
The Bank of England has estimated that around £300 billion is being kept in current accounts earning no interest.
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Now to be clear, if you want to keep more money your current account then you can, but this would not be beneficial for you, and analysis from Moneyfactscompare.co.uk shared on 21 September has revealed just how much people could be benefitting.
If that £300 billion were to be transferred over to a savings account with a four percent rate of interest, then this could earn a whopping £12 billion a year in interest for the combined account holders.
With that in mind, it's more advantageous to transfer your money over to a savings account rather than keeping it in your current account.
Rachel Springall is a Finance Expert at Moneyfactscompare.co.uk, and said: “Amid a cost of living crisis, every pound counts.
“Billions of pounds are being lost in savings interest, making it essential for consumers to take a step back and see how they can make their money work harder,” she explained.
For your current account, you can keep a recommended amount in there, between £500 and £1,000, to ensure that you always have enough money to cover your day to day expenses, according to Derek Sprawling, the head of money at Spring.
Speaking to Metro, he said: "A current account should be seen as a tool for everyday spending, not a place to store large sums of money long-term.
"Think of your current account as your digital wallet – designed for convenience, not storage. You wouldn’t carry £2,500 in cash to the supermarket, so why leave it idle in a current account? Treat it as a flow-through space for your money, not a destination."
According to new data from Spring, 6.4 million current accounts across the country contain £10,000 or more, which means that all that cash is earning no interest at all - but this same issue applies to those who have less than five figures in the bank.
Experts claim that those with above £1,000 in their current account are also prone to losing cash, with only 0.04 percent of UK current accounts beating inflation by earning four percent or more, while most do nothing, meaning that the value of your money decreases.
Sprawling added that you should aim to keep between £500 and £1,000 in your current account as a 'buffer' on top of paying for bills and other essentials.
He said that anything over this amount would be better off 'working harder for you elsewhere', as many current accounts sit well below the rate of inflation, as excess funds here are 'losing value in real terms'.
The expert highlighted that inflation is currently at 3.8 percent, with £10,000 in a no-interest current account losing about £380 in real value over the course of a year at this rate.
Sprawling calls it 'the hidden cost of inaction', as the value is 'effectively shrinking', adding that switching accounts to earn higher returns is key.
"I encourage savers to shop around and find the best rate that works for you but also take into account your needs," he advised.
Martin Lewis advises on his Money Saving Expert website that two of the best easy access savings account to look into at the moment are Monument Bank (4.51 percent interest rate, min £25k) and Chase (4.5 percent).
Joshua Nair