Savings accounts paying attractive rates of interest often seem too good to be true. Below the sky-high headline rates there are often conditions that can catch out the unsuspecting.
For instance, some savings accounts come with conditional bonuses. This usually means that you can receive a higher rate of interest only if certain conditions are satisfied such as holding your current account with the same provider or stipulating that you only make a certain amount of withdrawals from your savings account over a certain period. Interest rates can drop substantially if these conditions are not met.
Unconditional bonuses have received a lot of bad coverage but can suit certain savers. Savings accounts with unconditional bonuses typically have a bonus rate of interest of, say, an extra 1% for a certain period of time. After this initial bonus the interest rate on the savings account drops, often someway below the market-leading rate. However, if you are able to keep reviewing the interest rates available and you are willing to shop around and change your account, savings accounts with bonus rates can be beneficial.
If you think you may need to make withdrawals from your savings account, it is worth checking whether there are any penalising conditions. With some accounts you can lose interest for making more than a certain number of withdrawals, or you may even be told the account has to be closed for you to have continual access to your savings.
It is prudent to keep an eye on how much you have invested in your savings account and the rate of interest you are getting. Some savings accounts have tiered interest rates that pay higher rates of interest for having more cash in the account. Generally keeping an eye on the rate of interest you get on your savings is a good idea. Providers do sometimes reduce, as well as increase, the interest rates on their savings accounts and this can change how competitive they are compared with the market.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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