Avoid these nasty savings catches

Getting the right savings account isn't as easy as it seems, but by avoiding these four nasty catches you won't go far wrong

Savings should be simple, but things can still go wrong if you don’t watch out for these four nasty catches.

Don’t forget the bonus

You’ll probably have noticed that many of the best easy access savings accounts offer a bonus which tops up the interest rate. Even better, if the bonus is fixed you’ll be guaranteed a minimum return for a set period.

But bonuses are always temporary. Once the introductory deal has disappeared you’ll almost certainly be left with a rubbish rate. So don’t leave your savings to languish and be prepared to switch as soon as the bonus has gone.

Don’t pay withdrawal penalties

Surprisingly, some accounts don’t offer penalty-free withdrawals even though they’re advertised as easy access. Quite frankly this is a big con which can seriously destroy your return. Make sure you check out the terms and conditions before you apply or you may regret it later on.

Don’t get caught in a fix

If you can afford to lock your savings up, you’ll earn a guaranteed return with a fixed rate bond. But the longer you fix, the greater the risk that variable rate accounts will become more competitive, and leave your bond at the bottom of the pile. Try not to fix for more than a year or two, even if the rate on longer term bonds looks more attractive now because it may not stay that way for long.

Don’t pay tax

Finally, I think the biggest mistake of all is to pay tax on your savings when you don’t need to. Don’t forget, everyone is entitled to save up to £5,100 in a cash ISA without paying a single penny to the taxman. Cash ISAs are a no brainer and an easy way to top up your return.