Easy access savings - with a catch

Published:

22 November 2007

Topic:

News,Money,Savings

There are two new market-leading rates available in the easy access savings account sector - but both carry penalties for withdrawals. So is the improved interest really worth your while, or should you do more than just chase the best rate?

Variety is the spice of life - but in the case of savings accounts, it's also how providers protect their profit margins.

There are two new entrants into the 'easy access' savings account market that have gone straight in at the top of the best buy tables for rate - but they both come with a catch.

Firstly, Coventry Building Society has upped the rate on its Online Saver to 6.51% AER - a market-leading position. Abbey is not far behind, having increased the rate on its eSaver direct to 6.4% AER.

However, the catch with both accounts is that they carry withdrawal penalties - so your access is not so 'easy' after all.

In the case of the Abbey eSaver, if a withdrawal is made no interest will be paid for the month of the withdrawal on any of the account balance.

The withdrawal penalty on the Coventry Online Saver is not so harsh - you are only penalised for the amount you withdraw and not for the whole balance, which is a big positive.

Nevertheless, some cynics might say these headline rates are being offered to lure consumers in who are then likely to make withdrawals - meaning the providers claw back their margin. The providers, by contrast, will argue that they are simply offering the consumer more choice - and that the variations allow different types of savers to find an account that is tailor-made for their needs.

In my opinion, it's a combination of the two.

Certainly you can make these deals work for you, particularly if you are disciplined about the amounts you withdraw. They offer far better rates than their short-term notice account cousins and could help motivate savers to avoid the temptation of dipping into the cash that's meant to be building up for the long term.

However, my message to you is that you should look beyond the headline rate. Don't just grab a deal because it is the market-leader - think about the type of saver you are and how each account suits your needs.

There's plenty of choice in the market. For example, the ICICI HiSAVE Savings Account offers 6.41% AER, is guaranteed to be at least 0.3% above the base rate until 31 December 2011 and has no withdrawal penalties at all - you can get hold of your money as and when it suits you.

So check out the savings comparison tool now to compare rates on more than 4,000 savings deals. However, don't just search for the 'best' savings account - search for the right one for YOU.

DISCLAIMER: Please note that any rates or deals mentioned in this article applied at the time of writing and may no longer be available/applicable today.

Related Links

• Coventry Building Society Online Saver 6.51% AER
• ICICI HiSAVE Savings Account - 6.41% AER
• Abbey eSaver direct - 6.4% AER
• Compare more than 4,000 UK savings accounts now