We look at how to earn a fantastic rate of interest which will put other savings accounts in the shade.
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In this article I'm going to look at how to earn a fantastic rate of interest which will put other savings accounts in the shade.
Sounds too good to be true, doesn't it? True, the accounts that pay the highest rates of interest usually come with strings attached but that doesn't necessarily mean they won't be right up your street. Accounts which pay preferential rates aren't always widely marketed, so you could be missing out on some real hidden gems.
At the beginning of the year - in keeping with my New Year's resolution - I opened a new savings account. With all this financial data at my fingertips, I was surprised to find the most competitive account for me was actually offered by my own high street bank. The account pays an attractive fixed rate of 8% AER on my regular savings for a year. That'll do nicely!
Normally, when I write about savings accounts I automatically skip those with opening restrictions. But today this is exactly what I want to focus on. Perhaps I can unearth the perfect deal for you.
But let's start with some of the most common drawbacks for these savings accounts with strings.
Firstly, they require a commitment from you to save on a regular basis. Secondly, you don't usually have easy access to your cash (with some there is no access at all unless you close the account down early). Thirdly, money withdrawn often can't be re-deposited so they are only really suitable if you want to get into a good savings habit.
If none of that concerns you, you could enjoy a spectacular fixed return if you meet the conditions for opening the account.
So, let's take a look at these special deals in more detail:
Top Six Savings Accounts With Preferential Rates (and strings attached)
Bank or Building Society | Account | % AER | Min/Max Monthly Deposit | What's The Catch! |
|---|---|---|---|---|
Alliance & Leicester | Save & Protect | 15% fixed for 12 months | £10/£250 | Available to Premier current account customers when purchasing non-mortgage related life cover or other protections policies provided by Legal & General. Limited availability. |
Alliance & Leicester | Premier Regular Saver | 12% fixed for 12 months | £10/£250 | Must open a new Premier Current Account and must not have held any other A & L current account in the last 3 months. |
Regular Saver | 10% fixed for 12 months | £25/£250 | Preferential rate for Premier, Plus and Passport Account customers | |
First Direct | Regular Saver | 8% fixed for 12 months | £25/£300 | Must also hold a First Direct 1st Account. |
Norwich & Peterborough | Family Regular Saver Account | 8% including a 3% conditional bonus | £1/£250 | Available to those who have dependent children (aged up to 16 or 18 if in full time education). 8% rate includes a 3% bonus payable if you make 12 consecutive monthly payments and no more than one withdrawal in the year. |
Abbey | Fixed Rate Monthly Saver Issue 7 | 7.25% fixed for 12 months | £20/£250 | None! |
Big Banks
Some of the big banks offer great deals if you meet their criteria. I don't think you'll be able to improve on the eye watering 15% offered on Alliance & Leicester's Save & Protect account.
But - and it's a pretty big `but' - not only do you need to be an existing Alliance & Leicester Premier Current Account customer to qualify for Save & Protect, you'll also need to take out a life insurance and/or protection policy with Legal & General at the same time, making this a pretty exclusive offer.
With lighter restrictions, the Premier Regular Saver, also from Alliance & Leicester, pays an impressive 12%. You can apply as long as you open a new Premier Current Account as well. HSBC's Regular Saver offers a great rate of 10% if you hold the right type of current account, while First Direct's Regular Saver pays 8% but is only available to Direct 1st account customers.
A Great Account For The Family
If you have children why not take a look at Norwich & Peterborough's Family Regular Saver account. As long as you stick to the rules - by making 12 monthly instalments and no withdrawals - you could benefit from a high rate of 8%.
Fewer catches
If you don't qualify for any of these accounts, take a look at Abbey's Fixed Rate Monthly Saver account which pay a very competitive rate of 7.25%.
Anyone can take out this account as long as it is funded every month. But be warned: pay too little, too much or take cash out and the interest rate dwindles to a paltry 0.1%.
So that's the lowdown on some great savings rates, but don't let a great return lead you into an unFoolish decision. Never take out a product you don't need or isn't suitable for you just to take advantage of a preferential rate.
And if you'd rather have a `no-strings' savings account, you can earn 6.5% on some instant access savings accounts. Visit The Motley Fool's Savings Centre where you'll find a great selection of easy access accounts.