Earn up to 8% on your savings

Some savers are managing to earn a fantastic 8% return on their money - find out how.

Over the past couple of weeks, we've had to kiss goodbye to top paying easy access savings accounts such as the Citibank Flexible Saver Issue 6 and the ING Savings Account. These had been paying fabulous interest rates of 3.30% and 3.20% respectively.

With both of these accounts having now been withdrawn, savers are no doubt feeling a little peeved. After all, the base rate hasn't moved from its current 0.5% since March, and yet savers are still being left out in the cold.

So if you're looking for a better home for your savings, what options are you left with?

The top six

The chart below highlights the top six easy access savings accounts on the market:

Account and provider

Interest rate (AER)

Minimum deposit

Other

West Bromwich Building Society Branch Bonus Account 2

3.38%

£100

Includes a fixed bonus of 0.6% until 31 October 2010. Branch based only. Only 2 withdrawals permitted per year.

Sainsbury's Online  Saver

3.20%

£1,000

Variable rate for 12 months. Drops to 0.5% after this. Only 3 withdrawals permitted in the first year

AA Internet Extra Issue 1

3.15%

£1

Includes 12 month fixed bonus of 2.65%

Birmingham Midshires Telephone Extra

3.15%

£1

Includes 12 month fixed bonus of 2.65%

Lloyds TSB Incentive Saver

3.04%

£1

Must have a current account and no interest is paid during month a withdrawal is made

Scottish Widows  Bank Internet Saver

3.01%

£1

Includes 12 month fixed bonus of 1%

As you can see, the top paying account is the West Bromwich Building Society Branch Bonus Account 2 which offers an interest rate of 3.38%. Nothing wrong with that, you might say. After all, this is higher than the 3.30% previously offered by the Citibank Flexible Saver Issue 6 Account.

But there's a catch. Well, several actually. Firstly, it's branch-based only - and all branches are based in the Midlands. So if you live elsewhere, this account is useless, and if you want to access your savings online, you can forget it. Secondly, you can only make two withdrawals per year - which is pretty outrageous if you ask me given it's supposedly an 'easy access' savings account!

Next in line is the Sainsbury's Online Saver which offers a slightly lower rate of 3.20%. Again, this rate isn't bad, but again, there are restrictions. This time you can only make three withdrawals in the first year. Go over that, and the rate will drop to a paltry 0.5% - all I can say to that is...rubbish! What's more, you'll need a fairly big deposit of £1,000 just to open the account.

I don't know about you, but so far, I'm feeling a little depressed.

However, there are still some good easy access savings accounts out there, you just need to ignore the very best interest rates. My pick is the AA Internet Extra Issue 1 Account. This account still offers a decent interest rate of 3.15% and it's true instant accesss. That said, this does include a fixed bonus of 2.65% for the first year - so once those 12 months are up, you'll need to move your savings to a more competitive account. But on the plus side, you'll only need £1 to open the account and there are no withdrawal restrictions.

There is another way

If, having looked at the above chart, you're still feeling a little disheartened about savings rates right now, there might be another way. If you're prepared to be a little more adventurous with your savings, there are a couple of alternatives to the everyday easy access savings account you might want to consider. Just take a look at these two options:

Zopa

If you've had enough of banks and want to steer clear of them for a while, you might like to consider Zopa. Zopa is an internet-based peer-to-peer lending business which allows lenders to achieve attractive returns on their money while borrowers can get their hands on cash at competitive rates.

This means borrowers get better rates than on the high street, and lenders make a better return than they'd get from a traditional savings account.

You can lend from £10 to upwards of £25,000 and you can choose a term of either three or five years. You can also decide on the level of risk you're comfortable with - from A* rated borrowers to those with a less perfect credit record. Borrowers are fully credit checked and risk assessed and your money will be spread across different borrowers to manage the default risk.

As for the type of return you might get, over the last 12 months, the average return earned by lenders was 8% - that's after fees but before bad debt. Pretty impressive, I'd say!

Watch our video on Zopa to find out more.

Islamic banking

Another option you could consider is Islamic banking. This differs from 'mainstream' British banking in several ways. Firstly, Islamic finance is governed by the principles of Sharia'a (Islamic law).

This means that the payment of interest is prohibited and instead, one of the mainstays of Islamic banking is the sharing of profit and loss. So profits made are shared between the bank and the customer according to a predetermined ratio.

Secondly, investing in businesses that are considered unlawful (such as companies that sell alcohol or pork, or those that deal with gambling and pornography) is also prohibited.

You don't need to be Muslim to take part in Sharia'a compliant banking in the UK. So if you're looking for a new, and slightly different, home for your savings, this really might be an option for you.

So what are the savings rates like?

Well, if you're prepared to lock away your funds for two years, the Islamic Bank of Britain is offering a Fixed-Term Deposit Account with a target profit rate of 4.5%. Given that the top paying two year fixed rate bond offered by a mainstream bank is the Coventry Building Society Poppy Bond at 4.30%, this is a pretty tasty offer.

Alternatively, if you'd prefer to only tie up your funds for 18 months, you'll earn 4%. Profits for these two accounts are calculated and paid quarterly, or you can retain your profit to be invested with your deposit amount.

Of course, these aren't easy access accounts so it's only worth applying if you know you won't need to get your hands on your cash any time soon. You'll also need a minimum deposit of £1,000.

That said, the Islamic Bank of Britain does offer an instant access account - the On Demand Savings Account - but interest rates are much lower at 0.20%.

If you'd like to learn more about Islamic banking, read Protect your money - The Islamic way.

Get into the savings habit with lovemoney.com

If you need a bit of help getting into the savings habit, we can help.

First, adopt this goal: Build up your savings

Next, watch this video: How to save when you've got no money

And finally, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

More: Earn six times as much interest | Six ways to get the best rate on your savings

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