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Double-Digit Savings Rates – Too Good To Be True?

Double-Digit Savings Rates – Too Good To Be True?

Category: Savings

Updated: 31/10/2008
First Published: 06/03/2006

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It seems to be fashionable at the moment for financial institutions to launch savings accounts with headline grabbing rates of 10%. In the last couple of weeks alone, both Bradford & Bingley and Barclays have jumped on the bandwagon with their offerings.

With base rate at 4.5%, and heading downwards, if analysts' predictions are correct, then it is not feasible for a bank or building society to offer an account paying more than twice this level of interest unless it is limiting its appeal by numerous restrictions and conditions.

To get the deal with the Barclays new regular saver account, you must have a Barclays current account with a minimum of £1,000 salary or pension being paid in each month, so if you're an existing customer and meet this criteria then it's probably worth looking at.

What you need to bear in mind is that you must transfer between £25 and £250 to the account each month, the offer is only for 12 months and if you miss a payment or make a withdrawal during this period, the interest rate drops to a mere 3.6%.

On that basis, you can't see many non Barclays customers going through the rigmarole of transferring their current account and all the anguish that it may bring, just to sign up for a short term, restrictive offer.

However, if you're looking for a good combination of savings account and current account from the same provider, then the best deal on the market at the moment is the Alliance and Leicester Premier Direct current account, which offers a 10% regular saver account. You'll need to fund the current account with a minimum of £500 per month, but it's worth noting that, as well as the 10% regular savings rate, the A&L current account currently pays 5%, which puts many high street banks to shame.

Please don't get too excited about the Bradford & Bingley limited issue Christmas Saver account – you're already too late. It was launched on 4 February and withdrawn less than two weeks later. Now that's what I call a limited issue!

It's not all doom and gloom though. Chelsea Building Society have just launched its Postsaver 90 account, which pays 5.10%. You need a minimum opening balance of £500 and must give 90 days' notice for withdrawals. For more details visit wwwthechelsea.co.uk or phone 0800 169 1076.

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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