Why financial savings accounts with huge bonuses can depart you worse off… and the way to decide on the perfect deal for you: SYLVIA MORRIS
The key to getting the best interest on your savings is about knowing what kind of saver you are.
If you are organised, then you can have your pick of the top-paying accounts and earn the best rates around.
But if you are not a fan of finance admin and changing savings accounts regularly, the top rates may not prove the most lucrative.
That’s because of the top ten easy-access savings accounts and cash Isas, at least half have restrictions that could result in a lower rate over the long term.
Some have big bonuses that disappear after a few months, leaving you with a much stingier rate.
Providers do this because they know they can entice you with a top rate and there is a good chance you won’t move your money when the bonus ends. Bonuses are getting bigger while the number of withdrawals you can make is falling.
A big bonus can double your interest in the first year while some accounts only let you take money out once or twice a year.
If you are organised, you could consider one of these.
Some savings accounts have big bonuses that disappear after a few months, leaving you with a much stingier rate.
Nottingham Building Society has a new Bonus Access Saver which pays 4.14pc – but the rate drops to just 1.7pc in April next year.
On cash Isas, Trading 212’s app-based account pays 4.4pc including a 0.8-point bonus for a year with an underlying rate of 3.6pc.
Virgin Money’s Double Take E-Saver pays a top 4.15pc and it lets you make two withdrawals a year. But there is an unusual quirk.
Once you have made two withdrawals your account is effectively locked for the rest of the year.
Shawbrook’s Easy Access Bonus 5 (only available to new customers) pays 4.13pc with no withdrawal restrictions. But when the bonus part (2.13 percentage points) runs out you get just 2pc.
Skipton’s Bonus Cash Isa pays 3.92pc with a 1.87 point bonus. Tipton BS Reward Saver has a rate of 3.8pc but it only lasts until the end of July, dropping to 2.55pc.
I do not include accounts with bonuses or withdrawal restrictions in Money Mail’s star buys but it is important to keep you informed about what’s available.
My personal preference is an account that may pay less but requires less admin.
For example, the Family BS Isa tracks the rate paid by the top 20 accounts on £10,000, taking their average and adding 0.05pc. And with this Isa you know what your rate is for three months.
Move your savings by the end of May
If you have large sums of money stashed away in Nationwide and Virgin accounts, get ready to move some of it.
Virgin Money became part of Nationwide some 15 months ago, and since then each has given you full protection under the Financial Services Compensation Scheme – currently £120,000 from each brand – so your money is safeguarded.
But from April, all that changes. You will only get one lot of £120,000 straddling both of the organisations.
To ensure your money is still fully covered, you should move money above the new £120,000 combined limit out of your Virgin and Nationwide accounts.
There is a window – from February 24 to June 1 – when you can do so from fixed rate, notice accounts or limited access accounts without paying any fees or penalties.
