After ten years of dismal returns on savings accounts, the Bank of England has raised its base rate interest for the first time. Savers can now earn more with high interest savings accounts and accumulate substantial interest on their savings while they sleep. But with so many available options, how do you choose the right account for your money?
In this article we’ll explore:
- The Bank of England raises savings interest
- The best interest savings account to put your money in
- New interest rates and different types of accounts
- Current accounts
- Easy access savings accounts
- Notice savings accounts
- Fixed rate bond savings accounts
The Bank Of England Raises Interest on Savings
The Bank of England recently raised its interest rate for the first time in ten years. Despite the welcome raise for savers, it’s not an automatic ticket to financial stability. You still need to shop around for the highest interest savings accounts to ensure you’re getting the maximum growth for your money. Not so long ago, people paid tax on the interest they earned on their savings. However, since April 2016, a personal savings allowance permits people to save up to a certain amount tax-free. Consistently saving money is a vital part of maintaining financial health and independence. Setting aside money for a rainy day helps you avoid the poverty trap of living hand to mouth and instead begin to accumulate wealth.
The Best Interest Savings Account for Your Money
It’s important to choose the account that best suits your needs before deciding where to save your money. If you don’t take the time to do this, it could lead you to seek a wage day advance when surprise expenses crop up. The best interest savings accounts usually come with some obligations, so you’ll have to look around to find one that fits your needs. Payday Loans Net breaks down the different kinds of savings accounts and directs you to the top ones for each category. Use this guide to help you narrow down your options and find the best interest savings account for your money. Ready to save? Let’s get started!
The best current account at the moment is the Nationwide FlexDirect account. Due to its numerous advantages, you have to pass a credit check to get it. You can earn 5% AER for the first year on the first £2,500 that you deposit in the account – as long as you deposit at least £1,000 a month. After one year, the interest drops to 1%. This account offers a 12 month 0% overdraft depending on your credit score, after which the overdraft fee is 50p per day. You receive interest payments monthly, and there are no withdrawal restrictions.
Easy access savings accounts
Easy access savings accounts are exactly what they sound like. The idea of these accounts is to save money and accumulate interest while retaining the ability to withdraw money whenever you choose. That’s why these types of accounts typically have lower interest rates than fixed-rate saving accounts. With just £1 you can open the highest paying easy-access savings account with Birmingham Midshires, part of the Lloyds group.
This account pays 1.3% AER for the first 12 months and then switches to 0.55% – the standard BM savings account rate. You have to open and manage the account online with a minimum £1 cheque.
Additionally, you make all deposits by direct debit from your current account. While there are no withdrawal fees for taking out money, your interest rate could drop significantly. If that happens, it might be a good idea to switch accounts.
- The rise in the Bank’s base rate means more interest for savers
- Money earned in interest has a tax free annual allowance
- It’s important to shop around for the best deal that suits you
- The Nationwide FlexDirect account has the highest interest rates for current accounts
- The Birmingham Midshires account is the best paying savings account with easy access
If you don’t need instant access to your money, high interest savings accounts will give you the best return on your money.
A notice account requires you to give some warning before you take out your savings. These pay a better interest rate than easy access accounts with better rates for longer notice periods. The best one on the market at the moment is Buckinghamshire BS who will pay you a 1.55% AER variable if you agree to give them 180 days notice before withdrawing money. You need to open and manage this account by post or at one of their branches with a £1,000 first deposit. When you provide 180 days notice, you can make penalty-free withdrawals. Additionally, they will pay interest monthly or annually, depending on your preference.
Fixed Rate Bonds Savings
People feel a bit anxious regarding bonds, but they are just savings accounts with fixed interest over an agreed upon amount of time. During this period, you cannot withdraw money from the bond. Most savings bond accounts will not benefit if the interest rates rise during the fixed term. With a minimum/maximum deposit of £50 – £100,000, you can save money for one year with Atom bank at 1.95% AER. If you can manage for two years without the money from your savings, then you could get 2.05% from the same bank account. For three year fixed rates, Atom Bank comes out on top once again, paying 2.25%. In the longer term, you can get 2.35% for four years and 2.45% for five years.
So, how can savers maximize savings with a high interest savings account?
Despite the small rise in the Bank of England’s base rate, savers like you can still take advantage and earn the maximum interest on your savings. Not making the most of your savings could leave you underfunded in an emergency and in need of a payday loan.
If you have savings you won’t need immediately, fixed-rate savings bonds are your best option for high interest savings accounts. If you can’t commit to such a long term plan, you have several other options to help maximize your pounds. Before deciding where to store your savings, it’s crucial to check comparison websites for the most up-to-date information on new deals and interest rates. Financial institutions are constantly offering better introductory rates to attract new customers. You can take advantage of these deals to significantly grow your savings and build your wealth.