Home , News , What is Money? , Banking , Choosing a bank , Opening an account , Current Accounts , Online Banking , Telephone Banking , Savings Accounts , I.S.A , Mortgages , Pensions , Insurance , Travel Services , What is Interest? , Overdrafts , Credit Cards , The Euro , How to complain Benefits , Budget , CONTACT US! ,
Savings accounts.
Many people run their day to day banking needs by taking out a current account, these accounts offer very little or no interest, which is why you will need a separate ‘savings account’ to run along side your current account.
Just like current accounts, there are many types of savings accounts available depending on what you need to save for. You need a clear picture in your mind of what you are saving for, and what services you would like the bank to provide you with before you decide on which account suits your needs best.
The interest that you earn on a savings account is considered as a taxable form of income. Banks and building societies will deduct this tax from the interest that you earn. If you are a non-tax payer, you will need to fill in a form (R85 form), which can be picked up at your local branch. Once this has been completed and returned to your bank, your interest will be added to your account with no tax taken from it.
As with any banking service, you will need to shop around and make sure you get the best deal. The list given below will explain what some of the common terms used in relation to savings accounts mean.
regular savings accounts – A regular savings account offers a certain rate of interest to anyone who is looking to save money on a regular basis. The money is normally taken from your current account by direct debit. Some regular savings accounts will only allow a certain amount of withdrawals before the interest rate drops, so make sure you know how the account you have chosen works. You may find that if you make more withdrawals than is permitted, the interest that you receive could be greatly reduced.
notice accounts – Notice accounts work on the basis that after you have paid your money into the account, you would need to give a certain amount of days notice (typically 30 or 60 days) before you can withdraw your funds again.
This may sound like a bit of a pain, but you are generally offered a higher rate of interest for the inconvenience of having to give this notice.
If, for any reason, you do need to withdraw your money in a hurry, you can gain access to your money, but you will probably lose the interest by doing so.
postal accounts – Postal savings accounts operate by using the first class post instead of having a high street branch. By relying on the post to do your banking, postal accounts are usually able to offer a better interest rate, as they do not have the costs to pay for maintaining a branch.
fixed rate savings accounts – As the name suggests, a fixed rate savings account will offer the same interest rate for a set period of time. This is all very well if the interest rate is competitive when you first take the account out, but if the interest rates were to go up, then you could be losing out on the extra interest offered in a different savings account. On the plus side though, if the interest rates were to fall, you would still be sitting pretty on the higher rate until your fixed period is over.
tiered interest rate – A tiered interest rate means that the interest that you earn from your savings increases when the balance of your account increases. For example, the savings account in question may only pay 1% interest on any balance below £100.00, but a 4% interest rate for balances between £100.00 and £300.00, and a 5% interest rate for all balances over £300.00. Therefore, the more you save, the more they give you.
Disclaimer, Target Audience, Jurisdiction Last updated & checked: 30/03/2006