Easy access savings accounts
March 2009
If you need to get hold of your cash at short notice then open an ‘easy access’ savings account.
You have to be on your toes, however, because no two accounts are the same so check out what’s on offer.
Here are some things to look out for:
Best buys that aren’t
When a new account is launched it's often found near the top of the ‘Best Buy’ tables. Providers are keen to attract new money and may offer a higher starting rate of interest in order to achieve this.
However, keep an eye on the rate being offered over time as it may well become less and less attractive when compared to the best rates on the market. Thanks to ‘saver apathy’, many people don’t switch accounts even though there are higher rates around. So if you've used the same account for a while, it's worth checking to see if you can get a better rate.
Introductory bonuses
Some providers include a bonus rate for the first six months or so after you open an account. Often this pushes the account higher up the ‘Best Buy’ tables but the advantages of the higher rate for such a short time are negligible.
It is also one reason why you might see a difference between the 'gross rate' paid on an account and its Annual Equivalent Rate (AER). The gross rate is the rate you receive on day one, while the AER will be the average rate you would receive if you held the account for an entire year.
Quoted rates
To make their products seem more attractive, providers will vary the way they advertise their rates. Savings accounts usually pay interest on a monthly or annual basis. The AER should help you to compare accounts on a like-for-like basis.
Guarantees
Many accounts now offer a guarantee that their rate will be, say, 0.5% above the Bank of England's base rate for a certain period of time. If you are saving for the long term, make a note of when this bonus rate ends and review your account. Guarantees are welcome as you know that the interest rate will remain competitive for a set time.
Hidden charges
Some easy access accounts contain a hidden charge. Watch out for these. They offer you easy access to your money, but you could lose the interest for the month in which you make a withdrawal. While these accounts may offer good rates, they're not much use if you think you'll dip into your savings on a regular basis. So make sure you shop around for an account that suits the way you spend and save.
Online savings accounts
Most savings providers offer online savings accounts that may offer higher interest rates as they are less expensive to administer. They also make it easier for you to access up-to-date information on your savings rather than using passbooks or waiting for monthly or quarterly statements.
