Robert Powell takes a look at the latest savings offering from Coventry Building Society...
January is a tough month for many people – especially when it comes to money. It’s no surprise therefore that many of us have resolved to make 2011 the year we finally get our finances in shape.
One great way to do this is to start saving.
And to help you do this, Coventry Building Society has released a new savings account with an interest rate of 3.05% and a notice period of just 30 days.
Let’s take a closer look...
Very interest-ing!
As we reported in The best savings accounts for 2011, many people are currently quite reluctant to put their money into savings accounts due to the rubbish interest rates paid by most banks and building societies.
In today's video, I'm going to highlight five things you should consider when choosing a savings account.
And it’s true; the savings account market has been a little stagnant recently – with most easy access and notice accounts hovering around the same paltry interest rates.
Which is why it’s refreshing to see Coventry Building Society bringing something a bit different to the table with its eNotice account. The account pays 3.05% on a minimum investment of £1,000 and there’s a maximum balance of £250,000.
This interest rate is variable but it is guaranteed to stay at 3.05% until December 2011 – perfect if your New Year’s resolution is to get saving early for this Christmas (if you can bear to think about that!).
But this 3.05% rate does include a 0.50% bonus paid for the first year the account is open. So after this period it may be worth changing accounts if the rate on the eNotice is no longer as competitive.
Coventry BS is also offering the option for savers to accumulate interest on either a month-by-month basis or in one lump sum on the first anniversary of the account opening.
Withdrawals
The Coventry BS eNotice account is available to anyone over the age of 16 and you can pay into it at any point. But if you want to withdraw any money (or close the account) you’ll need to either give 30 days’ notice or pay a charge equivalent to 30 days' interest on the amount taken out.
It’s also worth pointing out that, as the name suggests, the eNotice is an internet-only account. This means that any withdrawals, transfers or other management issues have to be performed online – although you can make deposits by posting cheques.
This account obviously isn’t suitable for those who need access to their savings quickly. And if you haven’t got the £1,000 initial investment or don’t fancy managing your money online, you may also be better off with another account.
Fortunately there are a few other options offering competitive interest rates as well as more flexibility on withdrawals and deposits.
Alternatives
Here’s a table showing the current market leading easy access savings accounts. I’ve included the Coventry eNotice account so you get an idea of the difference in interest rates.
|
Account |
Interest rate (AER) |
Minimum deposit |
Important facts |
Interest added in one year from £2K |
|
3.05% |
£1,000 |
30 days' withdrawal notice |
£61 |
|
|
2.90% |
£1 |
Includes 12 months bonus of 1.25% AER |
£58 |
|
|
2.80% |
£1 |
Rate guaranteed for 12 months – after this, rate drops to 0.50% |
£56 |
|
|
2.78% |
£1,000 |
Includes 12 months bonus of 1.25%, only one free withdrawal per year |
£55.60 |
|
|
2.75% |
£1 |
Includes 12 months bonus of 2.25% AER |
£55 |
As you can see, going for the Post Office Online Saver instead of the Coventry eNotice will only see you slightly worse off in terms of interest, and the advantage is that you will be able to get at your money quickly should you need to. You'll also only need £1 to open the account.
The Nationwide MySave Online account, on the other hand, requires a minimum deposit of £1,000 and you will only have one penalty-free withdrawal each year. Any further withdrawals will see your interest rate slashed to 0.10% for one month.
Unfortunately if you’re determined not to use an online saver account (but if you’re reading this, chances are you won’t be!), then you’ll have fewer options at a generally lower rate.
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
The ING Direct Savings Account is the only option I’ve detailed above that isn’t an internet-only account as you’ll be able to set up and manage your savings over the phone. And the good news is, the interest rate is still competitive at 2.80%.
Most of these accounts also come with bonus rates for the first 12 months. This means that the rate will drop drastically after the first year and you may need to re-examine the rate and possibly change to a more competitive account.
Again, the only exception to this is the ING Direct account. But even this account’s competitive 2.80% rate is only guaranteed for 12 months – after which it drops to a measly 0.50%.
High interest, low access options
If you’re certain that you won’t need to access your savings for a while, it may be a better idea to lock them up in a fixed rate bond and take advantage of a set, long term interest rate.
The best way to compare fixed rate accounts is to head over to the lovemoney.com savings comparison centre. And to find some more tips on how to get a good deal on a savings account read Seven ways to maximise your savings in 2011.
Happy saving!
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More: Find a great savings account | Earn 10% on your savings | The top 10 cash ISAs for 2011