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Gain interest, don’t pay it: savings accounts that give you something back

30 Aug

High interest current accounts, ISA’s, tax free personal allowances, fixed vs variable savings accounts… Once you’ve made the decision to start saving, figuring out how best to do it can seem such a headache that it’s almost tempting to resort to an old fashioned piggy bank under the bed. But if you’re serious about saving, it’s worth setting some time aside to consider your options – a high interest savings account can really add to your accumulations. And while savings rates have plummeted, there is one type of account that offers increasing interest rates: the humble, oft-overlooked regular savings account. But what is it, how does it work and most importantly, which are the best accounts available to benefit you?

What’s the deal with RSA’s?

Put simply, regular savings accounts are exactly what they sound like – savings accounts which require you to make a deposit every month. They offer attractive interest rates, but often tie your money up with terms and conditions, limiting the withdrawals you can make or imposing penalties for withdrawals made. They are frequently time-restricted to a year or two and, to avoid you cashing out too much on interest rates, they often limit the amount of money you can deposit. It is also likely that you’ll be required to switch your current account over to the bank as well as your savings.

If you’re considering this kind of account, it’s important to consider whether you are going to be able to meet its ongoing requirements – if you’re being too ambitious with your savings plan and are unlikely to manage monthly pay-ins, or you’re expecting to dip into your savings frequently, this isn’t the account type for you. However, if you’re determined to save and want to lock your money away somewhere you can watch it grow, these accounts are ideal. Offering sky-high interest rates of up to 6%, if you use a regular savings account wisely, the returns will make it well worth your while.

The best regular savings accounts

There’s some great rates knocking around at the moment, but the right one for you depends on how you’re planning to use your account – are you happy to accept a slightly lower interest rate for greater flexibility of your terms, or do you want to maximise profit by saving as much and as frequently as possible? We’ve compiled some of the best offers for you to consider – there’s pros and cons to each, so make sure to choose one that suits your needs.

The best for big savers – First Direct Regular Saver

Pros – 6% interest rate, plus a £100 bonus for new customers. You can deposit between £25 and £300 each month, making it one of the higher savings allowances, and if you underpay one month, you can carry over your balance to the next month.

Cons – Your deposits have to be made from a First Direct bank account, so if you don’t already have one, you’re going to need to switch. And if you miss a payment or withdraw money from your savings, your account will be closed and your interest will be cut to 0.05% – so unless you can commit to a year of regular saving, you are going to miss out.

The best for flexibility – Club Lloyds Monthly Saver

Pros – Allows you to deposit between £25 and £400 per month, offering a higher savings amount than many accounts, and you can make as many withdrawals from the account as you want, though you can’t replace the money you withdraw. You do need a Lloyds account, but your deposits don’t need to be paid from that account, which offers a high 4% interest rate itself.

Cons – The interest rate on this account is a lower 4%, and deposits must be made by a standing order, which could be inconvenient if you wish to save a different amount each month.

The best for keeping your current account where it is – Leeds Building Society Regular Saver

Pros – It’s pretty rare to find a savings account that doesn’t require a linked bank account, so if you’re happy with your current account or can’t switch, this is a strong option. You’re allowed to make a withdrawal each year, and there’s no fixed term – you can save for as long as you like.

Cons – This account offers a relatively low interest rate of 3.05%, and if you miss a payment (of between £25 and £250), your interest drops to 1.25%. You’ll feel the same interest rate drop if you make more than one withdrawal a year.

Whichever savings account you plump for, it’s worth keeping an eye on its expiry date and switching over to a new bank once your high interest rate ends – people often have a misguided loyalty towards their bank, but with a bit of savvy shopping around, you can really maximize your savings. With up to £360 in interest available each year from some accounts, the hour or two of re-registering could be one of the most profitable hours of your career.

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