The association says banks are exploiting a loophole in the Banking Code to do this and urges customers to hit back by moving their money to rival savings accounts.
According to the association, many people tuck away their savings in the same account for years, presuming that their financial institution will reward their loyalty with a competitive interest rate. But often banks and building societies fail to inform existing customers about new and better deals, so savers' money stays in accounts with inferior interest rates.
And while new customers are attracted by high rates, they may find that the deals soon become less competitive. Although institutions advertise rate changes in newspapers, under the Banking Code they do not have to say how big the change is or even whether they have cut rates or put them up.
The code obliges institutions to tell savers with money in obsolete accounts - that is accounts closed to new customers but still operated for existing savers - about the rates on all their accounts every year. But many institutions choose to keep accounts live, without promoting them, rather than making them obsolete. This way they do not have to tell savers about products they are offering to new savers.
The Consumers' Association's Which? magazine looked at 36 banks and building societies over the past three years. It found that half the high street institutions used this practice to some degree. Building societies tended to be better than banks.
When Alliance & Leicester launched its account Prime 90 in 1996 it paid high rates but within a few months its rates fell below its competitors. Then, in April 1997, Alliance & Leicester launched Platinum Plus. This was similar to Prime 90 but paid an annual bonus of 0.5 per cent if you made no withdrawals. Alliance & Leicester did not write to Prime 90 customers about the new account even though if you moved pounds 10,000 from Prime 90 to Platinum Plus you would earn an extra pounds 105 interest per year.
In another case, Northern Rock introduced Branch Select Instant (BSI) in February 1998 paying between 6.85 and 7.5 per cent interest depending on the balance in the account. At the time, its existing Instant Access account paid 0.5 - 3.1 per cent. BSI also pays better rates than Northern Rock's four branch-based notice accounts even though having to give notice to withdraw money normally involves a better rate.
Other offenders included Leeds & Holbeck, Woolwich, Bank of Scotland, NatWest, the Royal Bank of Scotland and TSB.
A spokesman for Northern Rock said yesterday:"We believe our savings pledge introduced in March addresses the issue and puts us at the forefront of best practice." A spokeswoman for Alliance & Leicester said the institution had made changes in the way it communicated with customers since the research was carried out.
Helen Parker, editor of Which? said:"Thanks to our lobbying, the Banking Code is now being tightened up ... However, our advice is that if you are unhappy with your bank or building society for keeping details of better accounts from you, switch institutions rather than save with one that has treated you so poorly."Reuse content