Regular Savings Accounts

Savings accounts are bank accounts which pay interest on the money you put in. There are many different kinds of savings accounts on the market. Regular savings accounts are a place for money to be deposited at frequent intervals - usually monthly.

They require the account holder to put in a certain amount of cash - there is usually a minimum amount and maximum amount - each month to ensure they receive the interest rate on offer or to avoid receiving penalties.

Regular savings accounts often have high interest rates. They also, usually, last for around one year after which time the bank or organisation providing the account will encourage savers to switch to one of its lower-interest savings plans.

Who are Regular Savings Accounts for?

Regular savings accounts are ideal for people who want to earn a high interest rate in a short period of time and have enough money, after all essential bills have been paid, to put into the account each month. As the attractive interest rate only lasts a year, it's not ideal for anyone looking for a place to make long-term gains or to tuck their spare cash away for a rainy day. It might be a good place to save for next year's holiday, for example, or to store the money to help pay for a new car.

It's common for people to use regular savings accounts to store any cash that's overflowing from their ISA allowance.

Pitfalls of Regular Savings Accounts

All the interest earned in a regular savings account is taxed. So more than 20% of the money you earn on top of your deposited cash will go to the Inland Revenue. If you have up to £3,600 of excess cash you wish to save, it would be more financially savvy to put this into an ISA, where all interest is protected from tax.

The high interest rates offered in regular savings accounts come with another price. Most providers will charge savers for any withdrawals they make. Some might even just ban withdrawals altogether. Penalties are also charged if a regular payment is missed.

You can find regular savings accounts with low minimum deposits of £10, although £25 is more common. However, maximum payments are usually set at around £250 per month. If you are looking to save more money than this, regular savings accounts are probably not for you.
Even with top interest rates of ten per cent, it's hard to earn outstanding returns on regular accounts as there are so many restrictions.

Where to buy Regular Savings Accounts

All the high street banks and building societies and online providers will have some kind of regular savings plan. Some firms provide higher rates of interest to customers who already hold a current account with them. However, even if you are offered a good deal, it's worth doing some research and comparing deals. Online price comparison websites offer information on a selection of deals on the market.