Choosing The Right Savings Account
If you are finally ready to bolster your savings, you have come to the right place! Your first inclination would be to acquire a savings account and you would be right! However, not all savings accounts are created equally. Here, we will discuss the best savings accounts for your needs and the kind of saving accounts interest rates that you can expect.
What Are The Different Types Of Savings Accounts?
As you may have guessed saving accounts come with different terms and conditions.
Let us discuss what your choices are.
Regular Saver Accounts
This type of accounts required you to deposit a specific amount of money each month. There may be a minimum requirement depending on the financial institution you choose. This is the best savings account if you want to aggressively save and you don’t want to be tempted to make withdrawals.
You can look forward to:
Competitive/ High interest rates
Relatively low monthly payments
As with every account, there may be some disadvantages:
If you have commitments that require you to have access to funds, this may not be the account for you. Since there is limited access to your money and you may be penalized for a withdrawal.
You also have to put in the minimum required amount in the account each month. If you fail to do so this may attract a penalty as well.
Easy Access Savings Accounts
These accounts offer a quite simple arrangement, they allow you to earn some interest on the balance that you have in the account. They are also called instant access savings accounts. This is the best saving accounts if you want speedy access to your money.
Let’s take a look at some of the advantages:
You can open this kind of account for as low as one pound. So, it is the best savings account if you are strapped for cash, but still want to at least save.
You have immediate access to all of your funds, any time without any additional charges
In keeping with their free access policy, you will be offered an ATM card.
There are no restrictions on how much you can deposit into this kind of savings account.
Of course, there are trade-offs:
With this type of flexibility, unfortunately, you are only offered low often variable interest rates.
The interest you accrue may also be taxed.
Notice Savings Accounts
This type of account is restrictive in its approach. If you choose to open this type of account, you can expect to have to give notice to the bank when you want to make a withdrawal from your account. You usually have to give advance notice of anywhere between 30 days to 120 days. Some financial institutions also require you to tell them how much you intend to withdraw. This might be the best savings accounts for you if you need some active policing in order to save.
This type of account does have its advantages though:
These accounts usually offer high savings accounts interest rates.
You are allowed to deposit as much money as you like and also anytime that you want to.
With this account you can expect these disadvantages:
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You usually have a high minimum requirement for depositing. You may have to deposit as much as £1000!
You have to give notice of your intention to withdraw your funds. Failing to do so will invoke penalties like missed interest and a reduction in the interest that you would have normally been able to enjoy.
Individual Savings Accounts
You may hear these accounts also referred to by their acronym ISAs. These accounts function similarly to most of the other accounts that we have discussed. This is the best savings accounts for long term goals since you get the best interest rates if the access to your money is restricted.
This account offers these unique benefits:
The interest that your account will accrue is tax-free!
ISAs allow you to have access to your funds if you need them.
Unfortunately, Individual savings accounts come with one major drawback there is a ceiling on the amount of money that you can deposit. You can only deposit £20,000.
Also as mentioned above you can only access the most competitive interest rates if you do not touch your investment for a fixed term.
If you aim to be a serious saver, this is the best savings account for you. A fixed bond is a straightforward arrangement. You are allowed to make one lump sum deposit and your bank or financial institution holds it for a specific period of time. As with most of these financial products, the longer you allow your money to be held the better the interest rates offered. You may also be offered a tiered interest rate structure. This is where the more money you are able to deposit, the higher the interest rate! Exciting stuff.
As you can tell this type of saving accounts can be extremely advantageous if you really want to increase your investment
This type of investment is safe, you will get the interest rate that you agreed to at the onset of the arrangement.
There are disadvantages that you should be aware of before you open a fixed bond account:
You cannot take advantage of attractive rates during the term of the fixed bond.
Your initial investment may be quite high, most banks and other financial institutions usually require that you invest a minimum of £1,000.
You will not be allowed to make additional deposits into a fixed bond account.
You are also not allowed to make withdrawals for the duration of the fixed bond.
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