Guide to Easy Access Savings Accounts

Learn about easy access savings accounts to find the one that fits you the best and make your money work harder for you.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

Easy access savings accounts offer the great combination of higher interest than most current accounts and (you guessed it!) easy access to your money. These accounts can be a great way to earn interest on your money while not overly restricting your access.

What is an easy access savings account?

An easy access saving account places no restrictions on how you access your savings. These savings accounts allow you to access your money whenever you like. This makes them ideal if you need to dip into your savings for an unexpected expense or don’t want your money locked away for a period of time.

They also don’t tend to restrict how much you can withdraw or deposit (although some accounts do limit the number of withdrawals you can make without losing interest). So if you are not sure how much you can commit to saving each month, or don’t know how much you will need to withdraw from your savings at any one time, you won’t usually be penalised.

However, as these savings accounts don’t restrict access, they tend to have a lower rate of interest when compared with other savings accounts. But the good news is that they typically have a higher rate of interest than most current accounts.

What are the benefits of an easy access savings account?

The main benefit of an easy access account is accessibility. It’s the type of account you need if you expect to need to dip into your savings now and then. It lends itself to that emergency fund that savers keep aside and use if their washing machine fails or their car breaks down.

An easy access account can also be the first step towards a savings habit. If you want to save but aren’t sure you want to commit fully just yet, an easy access savings account allows you to deposit whatever you can. And it gives you the comfort of knowing you can access your money whenever.

They also typically have low starting deposit requirements. This isn’t the same across the board, but for most easy access accounts you will only need £1 to get going.

What’s the difference between easy access and fixed rate?

There are several differences between an easy access savings account and a fixed rate account. These range from accessibility to the amount of interest you can expect to earn. Let’s take a look:

Accessibility – Whereas with an easy access account you can dip into your savings whenever you want, with a fixed rate bond your money is invested for a fixed term (1 to 5 years). If you want to take your money out before the end of the agreed term, you may face a penalty charge.

Interest – Fixed rate bonds tend to offer a slightly higher rate of interest than easy access accounts. This is because you have committed to locking your money away for a period of time. Interest is also fixed for the term of your bond, whereas easy access accounts are typically variable rate deals.

Deposit – Many fixed rate bonds require a large initial deposit. Also, some fixed rate bonds don’t allow additional deposits during the term of the account. So, in order to make the most of the bond, you will need to pay in one large lump sum when you open it. In comparison, most easy access accounts can be opened with just £1.

Are my savings protected in an easy access savings account?

Easy access savings accounts are covered under the Financial Services Compensation Scheme (FSCS).

The FSCS means that you can recover your savings up to £85,000 if a bank, building society or credit union were to fail. The key thing to understand is that this is £85,000 per financial institution. If your savings amount to more than this, maybe try to spread them out across different banks and building societies.

How does an easy access savings account work?

Interest – With most easy access savings accounts, your interest will be paid on a yearly basis. This will either be on a set date or on the anniversary of the account opening.

When looking at an account, you may notice a difference between the AER (annual equivalent rate) and the gross interest rate on offer. This is because the AER assumes that you will keep your money in the account for the full year and therefore benefit from compound interest. Compound interest is the interest you accrue on the interest you have already earned.

Initial deposit – In order to open an easy access account, you will be required to make an initial deposit. With most accounts of this type this will be as little as £1, but you may find some have a higher minimum deposit requirement, e.g. £1,000.

Withdrawals – With this type of account, you can typically make a withdrawal whenever you like. However, some accounts may limit the number of withdrawals you can make each year without losing interest. Just make sure you read the account details before applying.

It’s also worth noting that some easy access accounts offer more-immediate withdrawals than others; it could take a few days for any withdrawals or transfers you make to go through. This is where they differ from instant access accounts.

What is an introductory bonus interest rate?

If you are comparing easy access accounts, you may see that some carry an introductory bonus – a bonus interest rate that is fixed for a period, typically a year.

For example, imagine an easy access account has an interest rate of 1%, but includes an introductory bonus of 0.2% fixed for 12 months. For that first year, you will earn 1.2% on your savings. However, after 12 months the interest rate will return to 1%. At this point, consider reviewing your rate and maybe switching your savings to another account.

It is also worth bearing in mind that the variable nature of easy access account interest rates means it is a good idea to review your rate on a regular basis anyway.

Which banks or building societies have the best easy access accounts?

The answer may be disappointing, as we can’t really say definitively which banks and building societies have the best easy access accounts.

What accounts are available and what their interest rates are fluctuate over time. So it is always worth checking back and comparing accounts if you are interested in opening a new one.

One important thing to note, though: at The Motley Fool, we don’t feature some of the smaller building society accounts. While these may offer a competitive rate, they can be in-branch only and/or apply to only a specific area of the UK.