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By admin | August 28, 2008
Banks and building societies are falling over themselves in the fight for your custom, using great rates on savings accounts to win you over. This means that the best buy tables are frequently changing, but a look at the current leaders in the savings race shows Manchester Building Society's Premier Plus account tops the table for no-notice accounts, with an AER of 5.26%.
If you're after a tax-free home for your 2006/07 individual savings account allowance, Portman Building Society's 15-day notice mini-cash ISA offers a competitive 5.5% AER.
A previously little-known name, Iceland's Landsbanki, has also recently entered the savings market and caused a stir with its
Icesave product - paying 5.2% AER, offering instant access and promising to pay at least the Bank of England base rate for five years.
But of course there's more to a good savings account than an attractive rate, and it's important not to be blinded by interest alone. Follow our tips to find the right account for you and your money:
1. Before you start shopping around for a savings account, stop and think how you will use it. Is there a fixed sum you can afford to save every month? Do you need instant access to your cash or can you afford to tie it up for a year or so?
2. For most people instant access makes the most sense, and thanks to increased competition, rates on the best accounts can be much the same as those requiring 30 or more day's notice.
3. If you haven't used this year's individual savings account (ISA) allowance, remember you can invest up to £3,000 in mini cash ISAs every year free of income and capital gains tax.
4. If you can afford to save a fixed sum each month and don't mind tying up the money for a year, it's worth considering a regular savings account as these pay the highest rates.
5. Read the small print and double check whether the rate includes an introductory bonus which may only be payable for a few months. Once the rate drops it's likely to be very uncompetitive. If you have the discipline to keep switching it may be worth taking advantage of bonus rates, but do be aware some banks have started to reject applicants who have already opened and closed bonus led accounts with them before.
6. Also check whether there are any withdrawal restrictions. Both HSBC and First Direct offer an account where no interest is paid in any month in which a withdrawal is made. This provides absolutely no incentive to save - the more money you save, the bigger the penalty when you come to withdraw any of it. Other high paying accounts limit the number of withdrawals that can be made.
7. Think about how you will pay in and withdraw money - branch access is important to many, but if you are prepared to manage your account remotely (either online or over the phone) you're more likely to get the best rates.
8. Once you have found the right account don't forget to regularly review the interest you are being paid, and be prepared to switch if yours is no longer competitive. If accounts are withdrawn or replaced by new higher paying accounts, rates will usually slip - there are plenty of high street savings accounts out there paying less than 1%.
Topics: Daily Updates |
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