Confused about the differences between savings accounts? You’re not alone. In a market full of thousands of different savings products it can be confusing to pin down the exact differences between each.
Here are some of the main things to look out for:
Some accounts offer easy access whenever you want to withdraw your savings. Others are notice accounts which require you to request a withdrawal – say with a 30 day notice period. There may also be withdrawal limits, such as 2 per year before you forgo your interest rate. Some may even require that you deposit money for a year before receiving your interest in a lump sum.
2. Regular savings
These are slightly different from standard savings accounts as you will have a monthly limit to add new savings. This might be £25 to £300, and the regular savings account itself may have an interest rate that applies for a year. The regular savings amount will typically be taken from your nominated bank account as a direct debit.
Cash ISAs are effectively savings accounts but are held in a tax efficient wrapper. This year’s ISA limit is £20,000. Every adult gets a new ISA limit each year. Once in your account, the interest accrued on your savings will always be exempt from taxation. However, if all of the yearly allowance is withdrawn from the account, you can’t top it up again for that particular year.
It’s possible to deposit into several different types of ISA accounts, but your allowance in total is still £20,000.
4. In branch vs online
Some accounts can only be opened and operated online and others will require that you go in-branch only. The latter tends to be popular with regional building societies in particular. It is well worth checking how you can access the account before you open it.
5. Frequency of interest payments
Some savings accounts pay interest on the anniversary of the account opening and others will pay it monthly.
6. Special groups
Some savings accounts are for children, others are for the over 50s and some are designed for specific purposes, such as to save for a house deposit (see the Help to Buy ISA for this). If you fall into these categories, you may find interesting accounts with attractive rates on offer from some lenders.
To find the best savings accounts, check our rate comparison tables for the latest best buys. These change all the time, so we use the software to hunt down the best options. You can apply directly online too.
Remember that for any savings account you consider taking out, you must read the terms and conditions very carefully, as many have special terms that can easily be missed and negatively affect your interest payments.