If you want to get hold of your cash at short notice but you still want a decent rate of interest then try an easy access savings account.
An easy access savings account is an account where you can withdraw your money within a few days. It used to be the case that interest rates on these sort of accounts were not overly generous. However, with the exception of branch-based high street accounts, these accounts now offer some of the highest rates around.
Best buys that fade away
When a new easy access account is launched it's often found near the top of the Best Buy tables. Obviously, the bank that provides it is keen to attract new money and a high rate is the easiest way of doing that. Quite often this can also cause a back-log in account openings, as everyone rushes to get the new high rate.
Over time however, it's usual to see the rate being offered become less and less attractive when compared to the best rates on the market. This process may take a couple of years. So, if you've used the same savings account for a while, it's usually worth checking around to see if you can get a better rate of interest.
Bonuses
One trick that many banks use is to include a bonus rate for the first six months or so after you open an account. Typically this could be in the region of an additional 0.5%. Often this will have the effect of making the account appear higher up the Best Buy tables than it would do otherwise.
It is also one reason you might see a difference between the 'gross rate' paid on an account and its 'AER' or annual equivalent rate. The gross rate is the rate you receive on day one, while the AER will be the average rate you would receive if you held the account for an entire year.
Interest frequency
Savings accounts usually pay interest on an annual or monthly basis. Some give you the option of choosing which you prefer.
Interest rate guarantees
Many accounts now offer a guarantee that their rate will be, say, 0.5% above the Bank of England's base rate for a certain period of time. This is useful for two reasons. First of all, you can be sure that any increase in the base rate will be passed onto you promptly. Secondly, it gives you reassurance that the interest rate will remain competitive for specified period of time.
Interest penalties
Some easy access accounts contain a hidden charge. They offer you easy access to your money but you lose interest in any month in which you make a withdrawal. While these accounts often offer good rates, they're not much use if you think you'll dip into your savings on a regular basis.
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