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Savings Accounts

What are they?

Savings accounts are offered by banks and building societies as a safe home for your spare cash. They usually pay higher interest rates than current accounts but have fewer features, e.g. no cheque book, debit or cashpoint card.

You can save money either via lump sums or monthly saving, often from as little as £1. Many accounts offer 'easy' access to your money, meaning you can get your hands on it within days, if not sooner.

What types are there?

Variable RateNotice PeriodFixed Rate

The rate of interest can change at any time, with little or no warning. While the interest rate might move broadly inline with the Bank of England Base Rate, currently 0.10%, you can't be sure of this unless your account has an explicit guarantee.

Beware, some rates include 'special offers' such as temporary bonuses, or start with a high rate that falls by the wayside over time (see 'marketing tricks' below), so it's important to keep your eye on the ball.

Should I go for variable or fixed?

Fixed vs Variable Tricky question to which no-one knows the answer for sure. Obviously, if you think interest rates will fall then locking into a fixed rate now seems wise, provided you can tie up your money for a fixed period of time.

A sensible strategy can be to hedge your bets by splitting your savings between both variable and fixed rate savings accounts.

Use our Variable vs Fixed Rate Savings Calculator to estimate whether a fixed or variable rate savings account might be the best option for you.

Marketing tricks

Banks and building societies are under pressure to make money for their shareholders and members respectively, so it's no surprise that many work hard to come up with crafty ways to attract (and then make money from) customers.

Below are some of the more common ploys you should be aware of:

Introductory 'bonus' ratesRegular saver 'bonus' ratesSlippery ratesRestricted withdrawals

Banks and building societies attract a lot of new customers when their accounts appear in the 'best buy' savings tables featured in many newspapers and financial websites. Adding an 'introductory', i.e. temporary, bonus rate to an account is an often used tactic to achieve this.

Candid Example

The Trustus Bank offers an introductory bonus of 1.50% p.a. for six months on its 'BigSaver' account which normally pays 0.10% gross p.a.

Over the first year you'll receive 1.60% for six months falling to 0.10% for the following six months (assuming the interest rate itself doesn't change), equal to 0.85% over the whole year.

Introductory bonuses are great if you move your elsewhere (if need be) to a more competitive rate when the bonus expires, but many savers don't.

Savings Account Jargon

Here's some of the more common savings account jargon you might come across:

Introductory Bonus RateA marketing trick used by some banks and building societies to offer a high initial savings rate, which is likely to fall when the bonus ceases.
Notice PeriodThe period of time that some savings accounts require you to give notice when you want to withdraw money.
Regular Saver BonusA savings account that offers a very high rate of interest if you save a regular amount each month, typically for a year.
Restricted WithdrawalsSome savings accounts restrict the number of times you can withdraw money each year.
Tiered InterestSavings account interest rates that vary depending on your balance.