Don't trust online banking? Here are a few alternatives for those who prefer to keep their savings firmly offline.
In what seems like many moons ago now, before I found enlightenment at The Fool, I worked part-time at a bank to make ends meet during university.
One thing I remember while working was the sheer amount of people who were reluctant to open an online savings account, even though they offered the best interest rates.
My recent article Are Internet Savings Accounts Safe? highlighted top-paying accounts which are operated solely or primarily online. Institutions can afford to offer these headline grabbing rates by cutting down on overheads and restricting branch access.
But what if you don't want to bank online? Can you get a great interest rate and not leave your security up to the web gods?
Here are the top-paying instant savings accounts which can be run offline, and opened with £1.
Provider and Account Name | Interest Rate (Gross/ AER) | Ways to operate account | Catches? |
|---|---|---|---|
Anglo Irish Bank | 6.3% | Phone/Post | No branches in the UK |
6.35%/6.28% | Phone/Internet/Branch | Heavy account restrictions. No interest is paid in a month when withdrawals are made. 0.98% bonus payable for the first 9 months. | |
6.27%/5.98% | Phone/Internet | Six month bonus rate applies. No branch access. | |
Akbank AK Savings | 6.08/6.25% | Phone/Internet (in progress) | No branch access. Newly established bank (since August 2006). |
BMW Savings eSaver (provided by Newcastle Building Society) | 6.01% | Phone/Internet | 0845 access number only. No branch access. |
Birmingham Midshires Direct Telephone Savings | 5.75% | Phone | 0845 access number only. No branch access. |
ING Direct Savings Account | 5.7% | Phone/Internet | Rate includes a 12 month 0.53% bonus. No branch access. |
Bank of Scotland Instant Access Savings | 5.5% | Phone/Internet | 0845 access number applies. The account can be opened in branch, but subsequent deposits must be made via other channels. |
National Counties Building Society Direct Access Share Account | 5.21% | Phone/Internet/Post/Branch | Only one branch in the UK, based in Surrey. |
Direct Line Direct Access Savings | 5.15% | Phone | 0845 access number only. No branch access. |
At first glance, interest rates offered for accounts with the option of at least running the account by phone are much less appealing than rates available for seasoned web surfers. Only seven out of the ten listed in the table beat the current Bank of England base rate (5.5%).
That aside, the table's clear winner is the Anglo Irish Bank. As well as offering a great catch-free interest rate of 6.3%, the account also offers free CHAPS (same day) transfers into your nominated current account.
This is not only a lot faster than the traditional method of transferring funds by BACS, which usually takes three working days, but saves those wanting to get their money swiftly a packet in costs.
I reckon this is a great account for people looking to save for a deposit for a house. CHAPS transfers usually cost up to £30 a time. For house-buyers looking to seal a deal quickly, this account provides a good way of getting past an often unavoidable fee while enjoying a great interest rate on your money. Interest is paid annually.
Walking A Savings Tightrope
If you're looking for a savings account where you can walk into a branch and see someone, it gets a little more complicated.
For me, trying to find a high interest account which lets you walk into a branch and withdraw money felt more like trying to get into an A-list members-only club than anything else. Only two of the accounts mentioned allow you to go into a branch to make deposits and withdrawals.
And even then, there are catches.
Take Citibank's Reward Saver Issue 2, which comes attached with a mouthwatering 6.35% interest rate. However a closer look reveals that the rate includes a bonus of 0.98% for nine months.
In addition, it's important to remember that the interest rate offered is variable. With an interest rate cut possibly on the horizon, there's no guarantee that the account will be paying that same great rate within a couple of months, let alone after nine.
The pitfalls don't stop there. No interest is paid on the account in any month when you make a withdrawal. So even though you can make deposits and withdrawals through the branch and are issued with a cash card, by the time you've managed to jump all the hurdles Citibank has put in your way to get to your money, you may not even want to.
By now you may be questioning my decision to include Citibank in the table. However, the account does offer full access to all its banking services. If you prefer to see someone when depositing your money and don't plan to make any withdrawals for the foreseeable future, then it may be the right account for you.
National Counties Building Society also provides branch access. Then again -- there is only one branch in Britain, based in Surrey.
You can still access your account by phone or by post, and the society has a regular landline number to contact which won't erode your phone bill.
Back To Basics
If going to a branch is important to you, here's a quick look at what the big four high street banks have on offer:
Provider and Account Name | Interest Rate |
|---|---|
Barclays Day to Day Savings | 3.93%/4.00% |
Lloyds TSB Guaranteed Tracker | 3.4% |
HSBC Flexible Saver | 2.67%/2.7% |
NatWest First Reserve | 2.08%/2.1% |
As you can see, wide branch access has a hefty price, and should be avoided if you have a considerable amount of money to save. All these rates lag well behind the base rate, and more importantly inflation --which means your money could end up being worth less in real terms than when you first deposited it.
Finding A Balance
From what we've seen so far, if you want a top paying account, you'll just have to take that leap of faith and dive into the worldwide web. And if it's security you're after, you'll just have to settle for a less juicy interest rate.
But there's no reason why you shouldn't be able to bank online and bank safely. If you're a regular internet user, make sure your anti-virus software is up to date and your computer's firewall turned on.
Download a good anti-spyware program such as Ad-Aware to prevent any prying eyes from spying on you. And last of all, never, ever give your full internet banking passwords to anyone. Whether it looks genuine or not, no reputable bank or building society will ever ask you for your full password.
Top Catch-Free Savings Accounts | Find A Better Home For Your Savings