You pay money into an easy-access savings account, the account provider will pay you interest on the money in the account and you can withdraw whenever you want to. Some easy-access accounts will place a limit on the number of withdrawals you can make.
You can have a look at the easy-access savings account options at the end of this page.
Key factors for an easy-access savings account
are:
- Easy-access. Your money is instantly accessible, but some accounts will limit the amount of penalty free withdrawals you can make in a time period. You will receive an interest penalty if you exceed the allowable number of withdrawals.
- Opening balance. The details of the account will make it clear what the minimum amount required to open the account is (there are plenty of accounts that only require £1).
- Maximum balance. Most Easy-Access accounts also have a maximum balance. It is not uncommon for the maximum balance to be £85,000 (in line with the Financial Service Compensation Scheme (FSCS) protection), but other accounts are up to £5,000,000. If you are fortunate enough with these sums of money, an easy-access savings account probably isn't the best place to keep it!
- Interest rate. Interest is expressed as a percentage followed by AER (annual equivalent rate). For example, 3% AER - this means you'll get £3 interest a year for every £100 that you have had in the account for 12-months. If your money has been in the account for less time when the interest is paid, the interest payment is adjusted to reflect that. Easy-access accounts tend to have a variable rate, which will move up and down over time. In general, if the Bank of England Base Rate (BBR) goes up, the interest rate will go up and vice versa.
- Interest payments. When you are paid the interest will vary for each provider. Zopa, for example, pays you interest every month (on the same day you opened the account). The AER rate they offer assumes that you keep the interest payment in the account and you continue to earn interest on it. The monthly interest would therefore be slightly less than 1/12 of the AER they offer.
- Protection scheme. Ensure the account is protected by the Financial Service Compensation Scheme (FSCS). If your provider goes bust (it happens!), you'll be compensated for all the money you have in the account up to £85,000 for a single account, or up to £170,000 for a joint account.
ALWAYS READ THE TERMS AND CONDITIONS OF THE SAVINGS ACCOUNT BEFORE YOU COMMIT
What I have done. I have an easy-access savings account with Zopa. It doesn't offer the best rate at the moment, but I really like the simplicity of the application. It is very easy to use, and gives you options to lock money into notice accounts with a higher rate of interest.
