Instant access accounts are getting better interest rates, but some are attaching conditions to withdrawals
Instant access savings accounts get better
Wednesday, 11 Oct 2006 12:02
Increased competition among savings providers means there are ever-better options around for people looking for a great rate of interest on an instant-access savings account.
But while headline interest rates are high, there are also warnings that providers are starting to attach terms to their accounts.
"After a period of calm, a further new entrant into the easy access savings market – Icelandic bank Landsbanki Islands hf – has sparked a rates war," said Stuart Glendinning, managing director of price comparison site moneysupermarket.com.
"It’s great to see another new entrant to the UK savings market - it offers more choice and also puts more pressure on those other providers offering a poor return."
But many of the high-interest savings accounts are now attaching conditions, Moneyfacts.co.uk points out.
Rachel Thrussell, head of savings at Moneyfacts, commented: "Within the traditional definition of an instant access savings account, the concept of incurring a penalty for withdrawals would be a contradiction in terms.
"Usually if we choose an instant access account to house our savings, this is because we are happy to forsake the highest rates of interest in return for immediate access to our money."
But things are changing.
"This week has seen the launch of Alliance and Leicester’s Direct Saver, paying 5.25 per cent. But if any withdrawals are made, the interest for that month is lost," Ms Thrussell said.
"The same condition also applies to accounts already offered by First Direct and HSBC, while Cheltenham & Gloucester and Britannia BS deduct 30 days’ and 180 days’ interest respectively."
But both Ms Thrussell and Mr Glendinning point to the new offering from Landsbanki as offering great rates with no strings attached.
"So while the rates on the above accounts are competitive, equally as good and even better rates can be found on ‘no strings’ instant access accounts, with the rate guaranteed to be paid regardless of the number of withdrawals made," Ms Thrussell said.
XXX