In today's video, I'm going to highlight five things you should consider when choosing a savings account.
In today's video,I'm going to highlight five things you should consider when choosing a savings account.
In today’s video, I’m going to highlight five things you should consider when choosing a savings account.
1. Bonus rates
The first thing you might consider is the rate of interest you’ll receive on your savings. However, you need to keep an eye out for bonus rates. Many savings accounts now come with bonuses, which temporarily bump up the overall interest, making them look more attractive.
However, once that bonus expires, you could be left with an account paying an interest rate close to zero. So if you’re going to choose an account with a bonus, be prepared to switch accounts as soon as the bonus rate expires.
2. Fixed rate bonds
If you don’t need immediate access to your savings, you could consider choosing a fixed rate bond as you may get a higher rate of interest. What’s more, the rate will be fixed for the term of the bond, so you don’t need to worry about the interest rate falling.
Just bear in mind you won’t be able to make withdrawals during the term of the bond. So only do this if you know you can be disciplined and leave your funds untouched for a year or more.
3. Tax-free savings
A great way to ensure you’re getting the best rate for your savings is to invest in a tax-free account, such as a cash ISA. So if you haven’t already used up your ISA allowance for this tax year, make sure you do. You can deposit up to five thousand, one hundred pounds in a cash ISA.
4. Easy-access restrictions
If you want to have immediate access to your funds, you might want to consider an easy access savings account. However, you should make sure you read the terms and conditions of the savings account carefully.
Some easy access savings accounts restrict how often you can withdraw money, and how much you can withdraw. So even if you think you can get your hands on your cash whenever you want, in reality you may not be able to.
5. Linked financial products
Finally, check whether your savings account requires you to take out a separate investment bond. This could involve exposure to the stock market, which is something not everyone is comfortable with. So unless you were thinking of taking out one of these investments anyway, I would steer clear.
Don’t forget you can compare a range of savings accounts at the lovemoney.com savings comparison centre.