The main banks Barclays, HSBC, Lloyds and NatWest continue to pay savers as little as 0.50 per cent on some accounts, MPs warned last week.
With inflation at 10.5 percent in the year to December, this is devastating the purchasing power of people's money.
Someone who in early 2022 10.deposited 000 pounds in a savings account at 0.50 percent, saw its value rise in real terms to 9.000 pounds fell.
It is possible to get much more interest from a challenger bank that offers better value to savers.
For example, this one-year fixed-rate bond pays a market-leading 4.17 percent, while Ford Money pays a fixed rate of 4.40 percent per year for five years.
But there is another way to make your money work much harder without even taking out a savings account.
If you owe money, you're likely paying a far higher interest rate than you ever will on cash or even in the stock market.
For example, credit card companies routinely charge an APR of more than 20 percent per year.
Sainsbury's Bank typically charges APRs of 22.9 percent once an introductory rate has expired, while M&S Bank charges 23.9 percent and the American Express Platinum Cashback Everyday card charges a whopping 28.1 percent.
If you have debt, focus your firepower on paying it off before you build up your savings, says Myron Jobson, senior personal finance analyst at Interactive Investor.
When tackling multiple debts, prioritize those with the highest interest rates and fees, then move on to the next most expensive and then the next, he adds.
Remember to include all your debts, such as z. B. Your mortgage, continue to service to avoid penalties for missed payments or worse.
Homeowners who have paid off all their expensive short-term debt may also consider paying down their mortgage.
With most loans, you can now overpay 10 percent of your outstanding debt each year, and that can pay off.
Someone who has 150.owed £000 on a mortgage that charged four percent a year over a 25-year term and were only overpaying by £100 a month would see their mortgage term shorten by four years and four months.
They would also charge interest worth an incredible 17.Save £082.
Mortgages are the cheapest form of debt, and some who took out their home loan several years ago may still be paying less than two percent. In this case, their money can work harder in the bank.
In most cases it will not.
As cost-of-living crisis drags on, debt becomes a growing concern. If you're worried, seek free help from charities such as StepChange, Citizens Advice or National Debtline.