Term or bond accounts
1 September 2007
If you can afford to put your money away for a year or more, then a term or bond account may be your best bet.
Savings bonds, or term accounts as they are sometimes called, enable you to deposit your cash at a fixed rate of interest for a set period of time. People who want a guaranteed income with minimum risk and are prepared to lock away sizeable sums of money for anything up to five years often use savings bonds. But while you would usually get more interest than you would get in an instant access account, the higher rates may also reflect the fact that the bank or building society is betting that rates will rise. In which case, your fixed rate will not be so attractive.
Many savings bonds only allow a minimum or maximum one-off lump sum to be invested at the start of the set period, so you can't add any more. You may not be able to access your money at all during the term of the investment or, if you can access your money during the term, you may face a penalty. Usually, you’ll just lose some of the interest, but in some cases you may have to close the account altogether.
