Which account is right for you? With interest rates at a record low, getting the best possible return on your savings has never been more important. In today’s market, it really pays to know what Savings Account options are available to you.
These savings accounts, also known as no-notice accounts, enable you to get your hands on your cash without restrictions. However the average interest rate paid on a branch-based instant access account is quite low. But don’t despair - you can get much better than this by shopping around for the best rate.
GOOD FOR: People who want the security of knowing they can get hold of their money without having to wait. But, you’ll pay for the privilege, as these accounts typically offer the lowest returns.
Under these savings accounts you generally have to provide notice of between 30 and 120 days to withdraw your money. As a result, these accounts may not be suitable for people who think they might need their cash in a hurry, but they do tend to offer higher rates than instant access accounts.
GOOD FOR: People who are confident they could wait for the required notice period.
The overheads involved in running these accounts are lower than on branch-based ones. This is reflected in the interest rates they offer, which are usually higher than on instant-access accounts. Internet accounts often let you withdraw your money without giving notice.
GOOD FOR: Web savvy people who need instant access to their cash but want to get higher returns than on branch-based accounts.
Banks and building societies have become increasingly reliant on using savers’ money to fund mortgage lending since the credit crunch struck, and this has led to many groups launching regular savings accounts.
Under the terms of the accounts, you agree to pay in a set amount of money every month for a year, although it’s sometimes possible to vary the sum. You can’t withdraw any of the money until the end of the year, when the interest is added to it and the total is usually transferred to a lower interest account.
GOOD FOR: People who have spare cash to set aside every month and for people who need a little help with the discipline of saving. Not so great for anyone with a lump sum to invest, as the money can only be paid in on a monthly basis.
With many of the best-buy ISA deals offering instant access to your money, it’s hard to see a downside. The benefits of ISAs shouldn’t be underestimated in the current low-interest rate environment. Not only do the accounts typically offer higher interest than instant access and notice accounts, but holders don’t have to pay any tax on the returns they receive. As a result, a higher rate taxpayer needs to earn 1.67% on a normal savings account just to equal every 1% they earn through an ISA, while a basic-rate taxpayer would have to earn 1.25%. There are limits to how much you can put into an ISA each year, and these tend to increase each year in line with inflation.
GOOD FOR: People who want to save long-term and can afford to lock in money for 12 months.
Comparision websites: Compareandsave, GoCompare, MoneySupermarket, Comparethemarket.
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