Earn 6.55% On Your Savings

There's a new market-leader in the instant access savings market - and it's so good, this Fool is putting her money where her mouth is!

Kaupthing Edge is stealing a march on the easy access savings arena with a new account paying 6.55%.

It's so good I have just put my money where my mouth is and opened an account. I can confirm that it took exactly five minutes to apply online and get accepted, I've already been sent a confirmation and my account will apparently be open in two days. Not bad.

So what's so good about it?

Well, the rate for one. The Icelandic bank's new High Interest Savings Account pays a whopping 6.55% AER - a market leader in its field.

The account is fully flexible and easy access, meaning that there is no notice period for savers who want to withdraw their cash, and - best of all - there is no penalty for doing so. This is important for many people. In my case, I plan to use my savings for a deposit on a house as soon as I have decided the market is bottoming out. While I believe that will take another year, it could happen sooner and I may need the cash quick.

Access to the account for deposits and withdrawals is via 24 hour online banking and a telephone support service is also available. The interest is paid monthly on the balance and terms are simple and transparent.

What is particularly attractive is that the Kaupthing Edge account doesn't come with a host of terms and other obligations that some of the high paying savings account do. You don't have to set up a separate account, invest a minimum sum each month or have your interest paid elsewhere. It is a straightforward account for those who want a decent rate of interest with immediate access to their money.

The launch of the account is yet another boon for savers, who are profiting from a highly competitive market in 2008, driven by the fact that banks and building societies are trying to get as much money in on deposit as possible to fund their mortgage lending.

But it's the foreign banks are really pulling out the stops out for the best buy tables, dominating the easy access and fixed rate bond leagues, and keeping UK providers on their toes.

Any downsides?

Mere niggles in what is an otherwise great account. The minimum sum is £100 and if your savings drop below this level a lower rate is payable - although this is such a low threshold that it shouldn't deter most people. If it does, you could open a Bradford & Bingley internet savings account instead. This account pays 6.51% AER, and the minimum deposit is just £1.

Both these accounts are only accessible online, so not suitable for those who want branch access to deposit their money. But again, in this day and age, that's just a niggle too.

Best of the rest?

While Kaupthing Edge is the market-leader when it comes to instant access accounts, if you're prepared to tie up your money for a year, you can get a higher rate. Indian savings provider ICICI has just launched a fixed rate bond at 7.2%, making it the market leader in saving bonds. However, you need to deposit at least £1,000.

If you only want to tie up £500, you could opt for the Post Office 1 year Growth bond instead. But bear in mind this pays slightly less than ICICI, at 7.05%.

Unlike the instant access accounts, which have variable rates, the rates of bonds are fixed - so you can be confident the rate won't suddenly drop after you've opened the account.

But the Kaupthing Edge meets my needs better so, for me, it has the edge over bonds. And with any luck, my account will be open and ready to go in two day's time as promised. Now I just need to find some money to put into it..

More: Top Savings Accounts For First-Time Buyers