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High Interset Savings Accounts

Are you looking for a high rate of return on your savings? If you have money to save and are looking to maximise the potential interest earned then a “High Interest Savings Account” could be the product for you. High Interest Savings Accounts are accounts that are held with a bank, offering you high rates of interest on the amount you have saved. The bank keeps your money stored in a safe place, giving you access to your money at any time.

You can open a High Interest Savings Account from as little as £1.00, however, depending on which type of account you open; there may be a higher minimum amount to open the account with.

As technology has evolved, so has the way you can apply for savings accounts. Most banks now offer an online application service. Therefore, if you have access to the internet, this seems to be the quickest way to open your savings account. However, if you are unsure of which type of high interest savings account will give you the best rate of return on your savings, then it may be worth while checking with your existing bank. Banks have financial advisors who are always willing to explain their current products and rates and they will also accept applications to open account within a branch.

If you have access to the internet, then this seems to be the best way to opt for a high interest savings account. Most banks are now offering specific high interest savings accounts when you open an Internet-only account. Which means that you don’t have any access to counter service, however you will still be able to manage your account online. Things such as viewing balances, transferring money and setting up standing orders can all be performed online. You are also able to post cheques to some banks who will then credit the cheque to your internet only savings account.

One of the downsides of an internet only account is that you may not be able to receive paper bank statements, they may be sent electronically via e-mail or you may have to view them on the relevant banks website.

Interest on your savings will be calculated in the form of AER which is “Annual Equivalent Rate”. The AER will set by each bank depending on their individual savings accounts products. The banks may offer a variable savings AER, which means that they can change their savings rates in accordance with any changes made in the Bank of England base rate. Some banks also offer “Fixed Rate” savings AER, this is where the interest rate will be fixed for an agreed period of time, however if a fixed rate savings account is opened, you may experience penalties if you exceed a number of withdrawals per year and you may also have to provide notice when withdrawing funds from your savings account

Whatever type of High Interest Savings account you open, the bank will usually pay the amount of interest earned on each account on an annual basis. However, some banks will pay the interest on a monthly basis. The amount of interest payable to you is calculated from the set AER. When the total amount of interest due has been determined, the payment of interest will be credited back to your savings account minus the relevant tax due on the interest. Any interest earned on your savings will be tax deductible at the basic taxpayers’ rate of 20% and for higher taxpayers; the rate will be 40% tax on any interest earned.

In order to achieve the high interest offered on these savings accounts, you may have to accept that you will not have access to a counter service within a banks branch. If you don’t have access to the internet to be able to open an internet only account then you may lose out on a slightly higher interest rate.

It should also be noted that if you open a high interest savings account that particularly focuses on having to give a “notice” period when withdrawing money, you have to budget around not having instant access to your cash.