How to choose a savings account
With so many savings accounts on the market, we show you how to choose the one right for you.
With so many different savings accounts to choose from and potential catches to watch out for, how do you pick the best?
The key is to consider what you need from the account and how you want it to work for you. Also think about how you want to manage the account. It may be that you need more than one account.
Easy or instant access accounts are ideal if you need to get at your cash without giving notice or having interest reduced. These are also perfect for rainy day money or in emergencies. The downside is that they may not pay the highest rates.
Regular saver accounts reward monthly deposits with rates that are better than instant access accounts. However you must pay in every month and you can’t usually access the money for a year.
Fixed rate accounts or bonds pay a set rate of interest for a set term – usually one to five years, but you will get less if you withdraw money during the term. As you’re tying your money up you are likely to earn a higher rate. However you may not want to tie your money up for too long as if interest rates rise the account may start looking less competitive.
Notice accounts lock your money away and require notice – usually between one and three months – to access it, in return for higher rates.
Whichever type of account you go for be sure to take advantage of your cash ISA allowance. Cash Isas let you save up to £5,100 tax-free each year and all of the different account types we’ve mentioned here will be available as ISAs.
Once you know the type of account you need - and that may be more than one - don't head straight to your bank. You may have had a current account with them for years but that doesn't mean they will give the best rates for your savings.
Shop around using comparison websites. Some top rates of interest are only there to attract you and will drop after a few months so think about longer-term and fixed rates, particularly if you're locking your cash away.