Warning for savers over hidden rules that could see them LOSE interest payments
SAVERS looking to make the most of higher rates on easy access accounts have been warned – there could be a catch.
You could end up losing interest with some so-called easy access savings accounts.
And in the worst cases, you could even find your account closed and remaining savings handed back to you.
HSBC’s Online Bonus Saver pays 3.47% – but there’s a pretty hefty catch with this account.
If you take any money out, your interest rate drops to 1.29% for the whole of that month.
Meanwhile Chorley, Coventry, Nottingham, Nationwide, Harpenden and Newcastle building societies all cut your interest rate if you exceed the permitted number of withdrawals.
Rachel Springall, finance expert at Moneyfactscompare, said: “Easy access rates are steadily rising, largely thanks to competition after the Bank of England base rate rises.
“However, savers who are comparing easy access accounts must be mindful that not all of them allow unlimited withdrawals.
“In some cases, heavy bonuses can apply for just 12 months – so it’s wise to make a note to switch before they expire.”
The Bank of England has hiked the base rate 12 times in the past 18 months and experts expect there will be more.
That means savings rates could go up further.
Rachel said: “As interest rates continue to rise, it’s uncertain whether savers would be content to lock their cash away for more than a year.
“Spreading cash across both easy access accounts and short-term fixed rates to secure a guaranteed return could be a wise move to get the best of both worlds.”
If you have not reviewed your savings for a few months Rachel says it’s worth doing now.
At the start of 2022 you couldn’t get an easy access rate over 1% while now there are plenty of options paying 3% or more.
She added: “As we have seen over the years, loyalty does not always pay.
“Some of the biggest banks are paying less than the market average of around 2%.”
Not so easy access
Out of the top 55 best buy easy access savings rates, 21 accounts restrict withdrawals.
They each have different conditions so you must read the small print carefully before opening a savings account.
Yorkshire, Principality and Buckinghamshire building societies limit the number of withdrawals you can make each year.
If you go over that limit, they’ll close your account and return your savings to you.
Top dollar, if you fit the bill
The best easy access rate is currently from Barclays, which pays 5% on balances of £1 or more.
The catch is that to qualify, you must be a member of the Barclays Blue Rewards scheme.
Joining will give you access to cash rewards and exclusive offers but you’ll have to pay a £5 fee each month.
The next best rate is from Santander with its Edge Saver paying 3.93%, but this account also comes with a catch.
After 12 months, the rate drops to 3.48% paid on balances up to £4,000. You can open an account with just £1.
Even the third best rate, Yorkshire Building Society’s Rainy Day account paying 3.85% on balances over £1 comes with a condition.
You can make just two withdrawals a year. If you need to make a third, you must empty your account and close it – meaning you lose the rate.
If you want an easy access savings account with no restrictions, the best rate is currently 3.6% from Ford Money.
You do have to open its Flexible Saver account online, but you can start with as little as £1.
Check the balance
Just over half of the top 55 savings rates can be opened with £1.
If you have £100 to save on day one, you can choose from 44 accounts.
Luckily, you can still get the top eight best buy rates so long as you pay in £1.
Bonus rates are temporary
Seven out of the top 50 easy access savings rates come with a bonus lasting just the first year, after which the rate drops.
The biggest bonus – and therefore biggest fall at the end of your first 12 months – is from Post Office Money.
Its online saver pays 3.47% when you open the account but the rate drops to 0.9% after 12 months.
Tesco Bank’s internet saver pays 3.45% in its first year and then falls to 1%.
Rachel recommends putting a reminder in your calendar so you can move to a new account before the rate falls.
You might need two accounts
Some of the best savings rates come with other conditions.
Newbury Building Society keeps its best buy saver at 3.5% for members who have had an account with them for one year minimum.
If you’ve taken a mortgage with them in the past 12 months and you don’t save with them, you can open a Welcome to Newbury account paying 3.3%.
Barclays, Santander, HSBC, Monzo and Chase Bank all require you to have a current account with them before you can open a savings account.
It’s possible to open both at the same time though.
But you will need to check the small print.
To secure Santander’s 3.93% Edge Saver rate, you have to pay a minimum of £500 into the linked Edge current account each month.
And there’s a £3 a month fee on that account – though for this you get 1% cashback up to £10 a month on some household bills if you pay by direct debit.
You also get 1% cashback up to £10 a month at supermarkets and on travel costs when you use your debit card.
If you max out that cashback allowance, you’ll be £17 better off a month even after you pay the fee.
Happy to bank through an app?
To get hold of banking app Chip’s 3.75% easy access savings rate you’ll have to connect to the account you pay in from using open banking.
That means you give Chip permission to link digitally to the bank that holds your current account.
It’s secure, but you’ll need to be comfortable managing all your savings through the Chip app.
It’s also worth noting that money you save into the Chip savings account is held by ClearBank, a fully regulated bank.
Read the small print
David Hunt, head of retail savings at Investec, said: “Savings accounts should be transparent and easy to use but unfortunately too many come with a range of terms and conditions which can be easy to overlook.”
He added: “Customers need to always look beyond the headline interest rate and check whether there are restrictions or penalties around accessing their money or whether their deal relies on a short-term bonus.”