The best savings accounts
With such a wealth of savings options currently available, choosing the best savings account in which to deposit funds can be challenging. Whether saving for retirement or a large purchase, a high rate savings account is a great way to maximize returns on savings or investments. However, a number of factors should be considered when choosing the most suitable type of account for short, mid or long-term savings, including term and how quickly the money can be accessed.
Types of savings accounts
- Standard savings account
A standard savings account usually offers low variable interest but allows you to save regularly. Funds can usually be accessed instantly with no penalties for withdrawal, making it extremely flexible.
- Fixed-rate savings account
Fixed-rate savings usually offer high, fixed rates that are guaranteed throughout the entire term – providing one of the best savings account interest rates available. However, they require you to make one large initial deposit for a fixed period. Adding funds throughout the course of the term is usually not possible and there is often a fee for early withdrawal.
- Notice account
Notice accounts require advance notice before money is withdrawn. Usually this is between 30 and 90 days and the bank will normally request the specific amount you intend to withdraw. However, because the bank or building society has this notice period, they are able to offer a higher interest rate.
Factors to consider when choosing high interest saving accounts
- Interest rates
Naturally, the first thing to consider when identifying top savings accounts is the level of interest offered. Represented as a percentage of what the bank will pay in return for holding funds, the easiest way to compare interest rates is to look at the annual equivalent rate (AER). This may also be called the effective rate. This represents the interest rate that would be earned on an annual basis if the interest was reinvested at the end of each year. Compound interest is also earned on top of the reinvestment.Furthermore, interest rates linked to savings accounts come in two forms: fixed and variable. Put simply, a fixed interest rate guarantees the percentage of interest throughout the full term of the deposit. Conversely, a variable rate may fluctuate in relation to the market and is often linked to the base rate set by the Bank of England – providing higher or lower rates over the full term. In addition to this, individual banks also offer higher or lower rates depending upon the type of savings account.
- Costs & fees
Some savings accounts are subject to a range of charges and fees that should also be considered. These fees come in many guises, including initial sign-up fees, deposit transfer fees or financial penalties for early withdrawal. Each account should be considered on its own merits and judged accordingly.
- Ease of accessing funds
Considering how and when funds can be accessed may affect decisions regarding the best savings account. Some accounts offer instant access to deposits at any time. Others however, may require a notice period or allow no early access at all. Either way, money will not accumulate as much interest – or sometimes no interest at all – if it is removed from the account early.
- Interest payments
Interest payments are typically made either monthly or yearly. Typically, monthly payments offer a slightly lower rate than high rate savings accounts with an annual interest payment to compensate for accrued interest.
Some types of high rate savings accounts have preferential tax treatment. This means that savers may accrue more interest over time as they can avoid tax charges being applied to interest earned, as is typical for normal savings accounts. However, tax-free savings come with certain limitations, such as maximum investment amounts, minimum terms, and often a lower interest rate which should be considered before opening an account.
Savings accounts: Key terms explained
When considering opening a savings account, it is important to understand the key aspects that distinguish the many and varied products currently available. Factors to consider include the term and notice period required to access your money, the type and rate of interest, and the type of account offered by the individual bank.
The investment term is the period in which your money remains in a savings account in order for it to maximize the interest accrued. It is often possible to withdraw your investment before completion of the stated term, however, this may incur costs and/or penalties that will diminish your return.
Put simply, compound interest may be thought of as “interest on interest”. This means that you will earn interest on the principal, plus the interest you have already earned. The amount accrued depends upon the frequency of compounding with higher frequencies bringing greater returns.
The Raisin platform
The Raisin platform makes finding the best online savings account simple. Featuring access to the most competitive savings accounts and interest rates from across Europe, Raisin allows for a quick comparison of the best bank accounts through our intuitive website. Through one convenient and hassle free platform, Raisin allows easy management of your savings accounts. In addition, all deposits are secured by the banks’ respective national deposit guarantee schemes for complete peace of mind. What’s more, Raisin is completely free of charge, with no hidden fees further down the line. Start exploring Raisin today and access the best interest rates from across Europe.
As of May 14, 2019