A few weeks ago I decided to start looking into savings accounts properly. For the first time in 5 years, I will soon – I hope – actually have money to save after seriously paying down debt. If I’m totally honest, I was completely at a loss where to turn for advice, so I engaged myself on a rate finding mission. The credit crunch has brought the Bank of England base interest rate to its lowest since records began – yet there are still good products out there if you don’t mind rate chasing after the introductory offers run out. I’m not adverse to doing this, as it’s a small amount of effort for potentially, hundreds of pounds of profit a year.
After weeks of research, I’ve concluded and personally recommend the following:
Instant Access Savings - ING Direct are by far the best provider right now in terms of rates and flexibility. They are offering 3.2% AER (3.16%) on their standard savings account with no limits on access. After the initial 12 month period, the rate drops to an appalling 0.5% which effectively makes it a BoE base rate tracker. However for those initial 12 months, you’ll be doing well with ample time to reassess nearer the end of the introductory offer. Their online interface is amazing, and it makes it nice and simple to sub-divide your ‘account’ into pots for specific things.
One word of caution however: Don’t be fooled by their claim you can have an account open “in about 10 minutes”! It might take 10 minutes to fill in the online paperwork, but it takes many weeks to get it activated and ready for use! Believe it or not, this includes snail-mailing a bank cheque (cheques? I had to order a new cheque book just for this! How antiquated… but worth the effort).
If you’re not keen on ING, or want a better raw rate, consider Egg: They’re offering 3.25% again fixed for the first 12 months but with slightly less ‘zing’ in their interface. Egg are part of the Citigroup of companies.
Regular Savings Account – This is basically a product that gives you an incentive to save every month, usually from £25 to £500 a month. If you don’t make a deposit, then you get penalised for that month. If you’re able to keep it up for the year though, they can pay really well. Right now Halifax are offering 5% and win hands down against the competition.
Cash Mini ISAs – Finally, no savings roundup would be complete without mentioning ISAs. If you don’t have one this year, there is still plenty of time. It’s a tax-free way of saving, and at the moment the best rate seems to be the Barclays Golden ISA, paying 2.58% AER. If you’re new to saving like me, then fill your cash ISA first! It’s tax free and a great way to ensure the government doesn’t start pinching your hard earned pennies. Each ISA can hold £3,600 of cold hard cash, and you get a new one each year.
Most banks are paying around much the same rate at the moment, so to keep things simple check your own bank before moving elsewhere. For the sake of a few percentage points, it’s probably not worth the hassle of transferring any you have right now.
Found better rates? Tell the world in the comments!