Last updated: 23/07/2020 | Estimated Reading Time: 4 minutes
Comparing savings accounts
If you want to find the best saving account out there that suits your needs, we can help you do that with our free and impartial savings account comparison service. By showing you what different products are out there on the market, we hope to aid you in making an informed decision on which one is right for you. There are a huge amount of different accounts that are currently being offered on the market right now, meaning that it can be hugely difficult to know which one is right for your specific requirements.
In This Guide:
Finding the best savings account
Interest rates are currently sitting at an all time low, with the first vase rate rise not expected until 2016. This has left many people pulling their hair out trying to find something that might actually offer them a return that makes saving worthwhile. However there are still some products on the market that can offer you a decent return on your savings, if you are willing to look around for a bit before committing to one account in particular.
The best way to compare savings accounts is by looking at their AER. AER stands for Annual Equivalent Rate, this rate is universally used across all savings accounts and is specifically designed so that it is easier for you to be able to work out how much you would earn on any given account. The better your AER, the more money that you will make on top of the money that you have saved away.
Another thing that you should look at is how long you are willing to tie up your money for. It is often the case that the longer that you are able to commit to keeping that money in that account, the more competitive your interest rate will be. One thing that this means is that you will not be able to access your money for a set period of time and in this time the amount that you will have in the account will be going up - due to the added interest that you will receive from the bank.
You should also look at how long the advertised rate of interest will be remaining the same. There are a ranging variety of accounts that offer fixed levels of interest for a set period of time. For example, some accounts will offer you one year of fixed interest rates and others will offer you five years worth of fixed interest rates. One advantage of having a fixed rate of interest is the fact that you will be able to know exactly how much interest you will be getting for any given period. This allows you to have a certain level of security because you know that your interest rate won't drop unexpectedly due to a change in the base rate or other affecting factors. However it is worth remembering that these rates are often well planned out by the banks because they believe that rates may go up in the fixed term period. This means that by locking into this rate you are potentially going to miss out better interest rates at some point in the agreed upon term. Many people still favour these accounts because of the peace of mind that they can offer.
Savings accounts with instant access
If you are looking for a savings account that will still allow you to use your money when you need to, then you should think about setting up an instant access savings account. As the name suggests, instant access savings accounts allow you to access the money inside them whenever you may want to. One thing to make sure you consider when setting up one of these types of account is the fact that the amount of interest you earn will fall when you take any money out of it. In other words you will earn interest based on how much money you have in it at any given time - rather than the amount that you had at the turn of the month.
One way that you may be able to improve the interest rate that you earn on these accounts is by making them your main account. By letting your bank know that this is the case you may be able to get a better return on your saved amount. Making it your main account means that you will essentially use it as you would a current account - you would have your income being paid into it, have your direct debits set up from it etc.
Individual savings accounts
While most savings accounts will be subject to a 20% tax on any interest that is earned on the deposited sum, Individual Savings Accounts are tax-free. This means that you can receive the full benefit of the Annual Equivalent Rate without losing some of your gains on tax. At the moment the maximum balance that you can have in ISAs sits at £15,240.
The amount of interest that you receive will be determined by how much cash you have in your ISA throughout the tax year - April 6th - April 5th.