Don't bank on the web to net the best deal

When banks and building societies harnessed the power of the internet to launch online current and savings accounts in the late 1990s, savers rubbed their hands. With staff, branch and telephone costs out of the equation, financial institutions would be queuing up to pass on the savings and offer great rates.

When banks and building societies harnessed the power of the internet to launch online current and savings accounts in the late 1990s, savers rubbed their hands. With staff, branch and telephone costs out of the equation, financial institutions would be queuing up to pass on the savings and offer great rates.

They duly delivered and web deals ruled the savings roost.

Fast forward to today, however, and things are different. In many cases, you can get more bang for your buck in a regular instant access account operated by phone, post or even through branches.

Where once you could rely on a better rate simply by logging on, it's now a case of shopping around to dig out the best deals across the different media.

Something clearly did not compute. Susan Hannums of independent financial adviser Chase de Vere says: "In the early days, only a certain number of people were prepared to open internet accounts, and the growth in such customers didn't come as quickly as originally thought."

So, faced with a need to keep new customers coming through the door, banks switched their focus back to phone and branch accounts. And, thanks to ferocious competition between providers, rates began to rise across the board - and have kept on doing so, she adds.

So, despite being cheaper to run, internet accounts won't necessarily give you the best deal now. They will, however, be competitive. A glance at our savings table highlights that many of the best rates are offered by online accounts.

Bradford & Bingley joined the fray with a new e-account last week - an internet-only deal where your money earns 5.25 per cent, with an extra 0.25 per cent for the first six months. Even after the bonus period ends, this will make it one of the best rates on the market, although the minimum deposit is £1,000.

The offer underlines the need for savers to look beyond the big high-street banks, adds Ms Hannums. While NatWest offers 4.25 per cent and Barclays 4.33 per cent to online customers, Alliance & Leicester pays 5.35 per cent a year and Yorkshire building society 5.2 per cent.

As with all savings accounts, keep an eye on the interest earnt by your cash. Six of the top 10 no-notice internet accounts lis-ted by information provider Moneyfacts include bonus rates.

ING Direct may have been criticised for failing to pass on every Bank of England rate rise, but its flat-rate 4.89 per cent for those prepared to bank by phone or on the web keeps it near the top of the table.