As we highlighted in last week's article '
More good news for savers', it's the easy access arena where most is happening and that continues to be the case with Coventry Building Society and Alliance & Leicester both having launched new deals in recent days. The Coventry deal was so popular, it was pulled after four days due to over-demand.
In the past three weeks, seven new easy access accounts have come on to the market, while the rates on another five products have been increased as providers battle for our cash.
Alliance & Leicester's Online Saver 5 has the highest rate at 3.15% and given that the average instant access account is paying just 0.15% according to the Bank of England, someone with £10,000 in savings could earn an extra £295 in gross interest over the next 12 months by moving to a better deal.
However, as is usually the case, the devil is in the detail and there are potential catches, such as bonuses and withdrawal restrictions, to be aware of when deciding where to put your money. So here's a run down of the main features of the leading easy access accounts:
Another new product, A&L's Online Saver 5 pays 3.15% on balances of £1 or more and money can be paid in or taken out at any time without penalty. The rate includes a bonus which runs until August 2, 2010 - you should look to move your money again once the bonus period ends. The size of the bonus depends on how much money you have in the account.
The bonus is 2.65% on balances between £1 and £24,999 so the rate will drop to 0.5% after the first year. Those with between £25,000 and £49,999 earn a bonus of 2.4%, giving an underlying rate of 0.75%, while the bonus on balances between £50,000 and £249,999 is 2.15% and 1.65% on balances above £250,000.
However, remember that under the terms of the Financial Services Compensation Scheme, only the first £50,000 (£100,000 for joint accounts) is totally protected so it is not advisable to invest any more than this with a single institution. For more information, read Clare Francis' article 'Who owns who?'.
Birmingham Midshires Telephone Extra
As its name suggests, this is a phone-based account paying 3.15% on balances over £1. There are no withdrawal restrictions although the rate includes a large bonus of 2.65% which lasts for a year, so you will probably need to move your money again once that ends. Also, bear in mind that the rate is variable so it could change.
Leeds Building Society Online Access Account
This is an online account paying a variable rate of 3.05%. The minimum deposit is £100 and you can make withdrawals at any time, via the internet, without penalty.
The rate includes a 12-month bonus of 1.0% and while this is smaller than those on many other accounts, it is still worth checking how the underlying rate compares with the rest of the market when the bonus ends as it may be worth moving your money because you can get a better deal elsewhere.
ING has responded to the increased competition in the easy access market by increasing the rate on its savings account to 3.0%. This rate is only available to new customers, however, as with the Coventry eSave account, it is fixed for a year.
The underlying rate is currently just 0.5%, so look to move your money to a better deal once the fixed term ends.
There are no withdrawal penalties and the minimum deposit is £1.
Coventry Building Society Poppy Save
Another best buy product from Coventry, the Poppy Save account pays 3.0%, although this includes a 1% bonus for the first 12 months and the rate is variable.
The minimum investment is higher than many of the other leading products at £1,000 and despite being an easy access account, it's not as flexible as some of the other deals - it is a postal account and only four penalty-free withdrawals are permitted each year (you lose 50 days' interest if you make more than that).
That said, Coventry will make a donation to The Royal British Legion's 2009 Poppy Appeal - 0.25% of your average balance in each 12-month period will be donated to the cause.
Principality's e-SAVER account is paying a variable rate of 2.85%. This includes a 12-month bonus of 1.2% so the rate will drop to 1.65% after that time (assuming Principality doesn't make any changes to its rate within that time.)
The minimum investment is £1 and the initial deposit must be made by cheque although, once opened, the account is managed online.
Intelligent Finance iSaver
The rate on this account is 2.85% but, unlike many other deals, this does not include an introductory bonus making it particularly attractive to those who don't want to move their money again in a year. The rate is variable however, so it is still important to keep an eye on it as there is no guarantee that it will remain competitive.
The minimum opening balance is £1 and you can make withdrawals at any time without penalty.
Sainsbury's Internet Saver is paying 2.80% for 12 months on balances of £1,000 or more. This is a special offer that is only available until the end of July. The standard rate of interest, which you earn after the initial 12-month period, is 0.75%.
The rate is good but this account is more restrictive than some of the other easy access deals, so you need to make sure you adhere to the terms and conditions - only three penalty-free withdrawals are allowed in the first year. If you make four or more withdrawals the rate will fall to just 0.75%. This is also the rate you'll get if your balance drops below £1,000.
Egg is another provider to have increased the rate on its savings account. The rate for new customers is now 2.80% and this includes a fixed bonus of 1.55%. The standard rate, which is the rate you will receive once the bonus period ends, is 1.25%, although this is variable so it could change.
The rate is available on balances of £1 or more and there are no withdrawal restrictions.
Key tips for savers:
- Take advantage of the great rates currently available - being active and moving your money could literally boost your interest earnings by hundreds of pounds.
- Don't be afraid of short term bonuses - with interest rates at a record low it's more important than ever to maximise the return on your savings and many of the leading deals include introductory rates. Just remember to move your money again once that period is over.
- Keep an eye on the rate - even if your account doesn't have a bonus, it could still lose its competitive edge, particularly if the rate is variable.
- Watch out for withdrawal restrictions.
- Don't invest more than £50,000 with a single institution (unless the account is in joint names, in which case the limit is £100,000).
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing. Products underlined can be applied for directly.
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