Are there any fees associated with savings accounts?
Savings accounts don’t typically charge any fees as standard.
However, some fixed rate savings accounts and notice accounts may apply certain charges such as:
- A penalty or a loss of interest if you want to withdraw your money before the end of the fixed term or notice period.
- A penalty if you want to close your fixed rate bond before the end of the term.
- A monthly fee. While most savings accounts don’t charge any maintenance fees, some savings accounts are only available if you have a current account with a provider, and this may charge a monthly fee.
Can I access my money anytime?
If you have an easy access savings account, you will often be able to withdraw your money whenever you like. However, it’s worth bearing in mind that some of these accounts may only allow a limited number of withdrawals per year, otherwise the provider will close the account or pay a lower rate of interest, for example.
For notice accounts, you have to wait until the end of the specified notice period before accessing your money, unless the provider allows earlier access for a penalty charge.
If you have a fixed rate bond, you normally won’t be able to access your money until the end of the term, which is why it’s so important to think about how much you deposit in one of these accounts.
How to choose the best savings account
When comparing savings accounts and deciding which one is right for you, there are several points to consider.
- What is the interest rate? This will be one of the most important factors for most savers. The higher the interest rate, the greater return you can get on your savings.
- How much do you want to save? Providers may pay different interest rates on different account balances, and accounts will also require a minimum opening deposit that could range from £1 to thousands of pounds.
- Do you need access to your money? There are different types of savings accounts available depending on whether you want to be able to dip into your savings or not. For example, easy access accounts may be suitable for an emergency fund, while a fixed bond may be more suitable for your longer-term savings goals.
- Do you want to deposit a lump sum or make regular deposits? While some accounts may allow you to deposit as much and as often as you like, other accounts set certain restrictions and conditions. It’s also worth checking the minimum opening deposit that is required to open an account.
- How do you want to manage your account? Providers offer different methods of managing their accounts, with some only available via mobile app while others give you the option of visiting a branch, for example.
- How do you want the interest paid? Some accounts pay interest monthly, which could be appealing for those wanting to supplement their income, while other accounts may pay yearly, for example.
- Do you want an ethical savings account? Some savings accounts and providers highlight their green or ethical credentials, which may be important for some savers. Similarly, there are Shari’ah compliant savings accounts on the market which pay an expected profit rate, instead of an interest rate like traditional savings accounts.
- Are you eligible for the account? Some savings accounts are only available to existing customers (such as those who hold a current account with the provider), while others may only be available to those living in certain postcodes or who meet certain criteria, for example.
- Are you at risk of paying tax on your savings interest? If you think you may earn more interest than your Personal Savings Allowance (PSA), you may want to consider a tax-free cash ISA instead.
What’s the best savings account for beginners?
If you’re new to saving, an easy access savings account is likely to be the simplest and most user-friendly option. These accounts typically allow you to add to your savings when you choose and make withdrawals if you need to access the money.
However, look out for any accounts that restrict the number of withdrawals you can make or that come with a bonus rate for a limited period.
If you’re at the beginning of your savings journey, it may be worth looking for accounts without any complicated terms and that don’t require a large opening deposit.
Instead of an easy access account, new savers may also be interested in a regular savings account. While these typically come with more terms and conditions, they can help to encourage a regular savings habit as they usually require you to deposit a minimum amount in the account each month.
How do I open a savings account?
It should be fairly straightforward to open a savings account. Depending on the account you choose, you may be able to open it online, by mobile app, in a branch or over the phone, for example.
You will usually need to provide some personal details, including your full name, date of birth and address history, when opening a savings account. You may also need to show some proof of ID, such as a driving licence, so the provider can verify your identity.
These identity checks don’t involve any credit checks and won’t affect your credit score.
You may also need to provide other information during the application process, such as details of another bank or building society account that will be “linked” to the savings account for deposit and withdrawals, for example.
Once you’ve provided all the necessary details, you will usually need to deposit a minimum sum to open the account. This could be as little as £1 or as much as £10,000 or more.
Bear in mind that many providers require you to be a UK resident and to confirm that the UK is your only country of residence for tax purposes.
What should I do if my savings account is offering a low interest rate?
Savings rates have been higher over the last couple of years than they have been previously, which means anyone who hasn’t reviewed their savings and switched accounts may be earning a below-average rate of interest.
For example, if you’ve put your money in a savings account with your current account provider for convenience, you could be missing out on significant amounts of interest.
The good news is that it’s easy to open a new savings account and switch to a higher rate.
Evaluate your savings goals
When choosing a new savings account, it’s important to think about what you want to do with your savings. For example, if you have a lump sum that you won’t need to access for several months or more, you may want to look at locking in a rate with a fixed bond. Alternatively, if you want to have access to your savings so you can dip into them in case of an emergency, for example, an easy access account is likely to be most suitable.
Compare accounts
Once you know the type of savings account that best fits your requirements, you can compare accounts on our charts. You can view which accounts offer the best savings rates, as well as comparing other features such as management methods and opening requirements.
Switch accounts
If you’ve found a savings account with a higher rate of interest, you can then move money from your existing account into the new account. Bear in mind that, if your savings are locked into a fixed rate bond, you may need to wait until the end of the term before switching.
Regularly review your savings
After you’ve moved your savings to a higher-paying account, that’s not the end of the job. You should regularly review the rate paid on your savings account (particularly if it’s a variable account as providers may change the rate) and compare it with the top savings rates on the market to ensure you’re still getting a competitive return.
