Super Savings Rates Are Still Available!

Egg has upped the rate on its savings account to 6.55%.

This article was first sent to Fools as an email in our 'The Good, The Bad and The Ugly' campaign.

It's been pretty ugly in the savings market recently. Last week, two Icelandic banks, Kaupthing and Landsbanki plunged into administration, leaving thousands of savers confused and wondering if their money was safe.

But as uncertainty continues to cloud the future of banking as we know it - and despite the half-point interest rate cut by the Bank of England last Wednesday, institutions still want our cash, and are willing to reward us handsomely for it.

Hatching a savings plan

Egg is the latest bank to hatch an assault on the savings market, and has upped the rate on its savings account to 6.55% for both new and old customers transferring money into the bank.

You can make unlimited withdrawals from the account without penalty. However, the account does come attached with a 1.8% bonus for one year. After this time, the rate will revert to its standard variable rate, currently 4.75%. There is also a maximum balance of £100,000.

However, whether you're an Icelandic refugee looking where to put your cash, or just a saver left reeling from the unfortunate series of events, one question you will be asking yourself is: how safe is it?

Well, it's no secret that Egg's parent bank Citigroup has been hit by the credit crunch. In the second quarter of this year, the bank lost $7.2 billion (£4.2 billion), bringing its total credit crunch losses to over $50 billion.

Its credit default swap (which effectively measures how risky a bank is), currently stands at 357 basis points. This is double that of Lloyds TSB and Barclays.

However, just to put things into perspective, in CDS terms the market thinks Citigroup has as much chance of going bust as Marks and Spencer. In addition, the CDS for one Icelandic bank soared over 3,000 basis points before it went bust, that's way, way higher than the rate for Citigroup at 357 points.

What's more, Citigroup is a goliath in banking terms, and, with over $2.1 trillion (£1.2 trillion) in assets, is the largest bank in America using this measure.

In compensation terms, it's also worth remembering that Egg has a separate FSA license to its Citigroup parent, meaning that if you have savings with both institutions, you get £50,000 FSCS protection from each bank.

So, here's how Egg compares to the best of the rest:

As you can see, several of the highest paying savings accounts are provided by the banks which have been in the headlines recently.

Safety in numbers

HBOS owned Birmingham Midshires was gobbled up by Lloyds TSB in a deal which has yet to be finalised, while both Alliance and Leicester and the savings arm of Bradford and Bingley were taken over by Santander.

All these banks are in better positions now they have been propped up by their stronger rivals. Plus, let's not forget the latest cash bailout by the British government.

National savings

Many savers have understandably been looking for total, absolute safety and have put their money in National Savings & Investments (NS&I). It's attractive as accounts are 100% guaranteed by the Treasury.

However, in order to get the best returns, you'll often need to tie your money up for at least three years, which isn't always a viable option.

When you compare NS&I's instant access products, it doesn't measure up so highly. For example, from 22^nd October, its Easy Access savings account will pay just 1.15% AER on balances from £100 - £999, which is well below current inflation levels of 5.2%.

For some other options, take a look at this article by fellow Fool writer Cliff D'Arcy, which explores other safe havens which provide more decent returns on your cash.

If recent events are anything to go by, savings are set to be shaken up even further. However, that's no reason why your money should lose out on some pretty decent returns.

Safety may be a primary concern in these troubled times - but then again, I won't be putting my money under the mattress just yet.

More: Big Banks For Safe Savings