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What is a High Interest Savings Account?
If you are planning to increase your money by putting your money into a savings account, you will always look for providers which offer you the highest, if not industry leading, interest rates for your money.
High Interest Savings Accounts are thus not a specific type of account, but special savings accounts that offer above-average interest rates tend to advertise themselves as the best option for you to pick in order to profit from your money savings by offering the highest interest rates.
Hence, high interest savings accounts include ISA accounts, High Interest Bonds, Easy Access Savings Accounts, Offshore Savings Accounts, Children’s Savings Accounts, Notice Accounts or Regular Savings Accounts.
Banks and building societies tend to pay the highest interest rates to new savers in order to familiarize them with the routine of saving and to attract new clients for other financial products. This means that it is likely that you start out with a high interest savings rate, which decreases the longer you keep your account.
Other bank accounts that offer high interest rates are so called High Yield Accounts, which are only offered to certain customers. They offer higher interest rates, as they require you to make a significantly larger deposit, keep a high balance over a longer amount of time and limit the number of transactions you can make in and out of the account to a minimum.
Drawbacks of only looking at High Interest Savings Accounts
Banks advertising their products as High Interest Savings Account do not always in fact offer the best rates and deals, even if they claim to do so. Hence, it is always worthwhile taking a closer look at other services offered, including standard current accounts.
Keep in mind that a high interest rate is not all that makes a good savings account. As for all types of savings accounts, it is important to the check terms and conditions of your account in order to find the best deal for you and avoid hidden charges or fees.
This includes checking the number of times that you can make money withdrawals within a year, fees you need to pay for money transfers and the conditions that apply if you choose to take your money out of the account earlier. Also look at the conditions how you will operate your account, you might prefer talking to a person in a branch rather than organizing everything via phone or the internet.
How to choose a High Interest Savings Account
Online banks traditionally offer higher interest rates than other banks, since they have lower expenses and fewer personnel. If you are fine with or even prefer organizing all your funds online, which means that you are often unable to talk directly to a person in a branch, this is a good option to get a better deal and make the most out of your money.
Try and avoid interest rates that are artificially boosted and are only offered to you during an introductory period. It is likely that once this period expires, interest rates will drop significantly and other deals will become more beneficial for you. Also keep an eye on the expiry date of your introductory term, so that you can react quickly and switch early without losing better interest rate deals.
Consider switching to another savings account if you feel that you are currently not receiving competitive rates. Before you do, carefully check all offers made by banks and building unions before you choose a High Interest Savings Account for yourself. Shop around for the best offers and compare interest rates.
Think about the fact that receiving lower interest rates might be a necessary tradeoff in order to have other services that you require. If you want to access your money from oversees or make transfers in other currencies, other savings options such as an Offshore Savings Account or a tax free ISA account might be more suitable for you, even if they will not have the highest interest rates.
Generally evaluate your personal priorities and the overall benefits you expect from your savings account. This includes looking at the sums that you regularly want to put into your account as well as the accessibility.
Choose an Easy Access account if you want to access your money whenever you need it, rather than a regular savings account that might restrict your access. Look into Children’s Savings Accounts or Junior ISA’s if you are planning to put money aside for your child’s future.