Savings Bank Account
Savings accounts generally pay higher interest rates than current accounts. They are generally low-risk investments suitable for short to medium-term savings.
Savings accounts are deposit-based. This means you'll get back the money you have put in plus interest, unless the bank or building society collapses. But if this happens, and as long as the firm is regulated by the FSA, the Financial Services Compensation Scheme (FSCS) may be able to pay compensation to customers, up to a set limit. Visit their website for more information.
Savings accounts have different features, accessibility and benefits. The main types are shown in the table below.
| Type of account | Features | Access |
|---|---|---|
| Deposit | Usually pays higher interest than current accounts. | Instant or easy access. |
| Cash ISA | There are limits to what you can pay in. Usually pays higher interest than normal deposit accounts and this is not taxed. You can put money into it in each tax year up to the limit or you may be able to switch to another ISA account if the new provider accepts transfers. | Instant or easy, but some can have notice periods. |
| Fixed notice | You have to give notice if you want to take your money out, e.g. 60, 90 days. | Penalty if you withdraw your money without giving enough notice. |
| Fixed-rate bond (term accounts) | You usually have to leave your money in it for one year or more (the term). Often minimum deposit e.g. £1,000. | Might be difficult or could involve a penalty if you withdraw during the term. |
| High-interest regular savings | Your current account is with the same provider as your savings account. You regularly transfer the same amount each month into this account for a fixed period. | Usually, interest is only paid yearly, and you can only withdraw yearly. |
Running a Savings Account
Don't just put your money away and then forget about your savings account: interest rates change all the time.
It's a good idea to regularly check – say, once a year, or when interest rates change – that you are still getting a good deal. If not, switch to a new account – but watch out for any penalties or loss of interest on closing the old account.
Your bank or building society must tell you if the interest rate on your account changes. They also have to give you the right to switch accounts for free if the interest rate changes significantly.
Top Tips
- Shop around – regularly check to ensure you are getting the best deal.
- Check what notice period the account has.
- Watch out for penalty charges when you make withdrawals.
