Rachel Thrussell, Head of Savings at moneyfacts.co.uk comments on the growing trend, for providers to attach withdrawal terms and conditions to instant access savings accounts.
"Within the traditional definition of an instant access savings account, the concept of incurring a penalty for withdrawals would be a contradiction in terms. Usually if we choose a instant access account to house our savings, this is because we are happy to forsake the highest rates of interest in return for immediate access to our money.
"This week has seen the launch of Alliance and Leicester's Direct Saver, paying 5.25%. But if any withdrawals are made, the interest for that month is lost. The same condition also applies to accounts already offered by First Direct and HSBC, while Cheltenham & Gloucester and Britannia BS deduct 30 days' and 180 days' interest respectively.
"Today also sees the Icelandic Bank, Landsbanki enter the UK savings market with Icesave, launching the no notice Internet account, Easy Access. Paying a market-leading rate of 5.20%, which guarantees to beat bank base rate by 0.25% for three years. So while the rates on the above accounts are competitive, equally as good and even better rates can be found on 'no strings' instant access accounts, with the rate guaranteed to be paid regardless of the number of withdrawals made.
"Today's consumers have little time to spend constantly researching their financial products; often they merely demand a simple product offering a consistently decent return.
"Consumers should avoid choosing an account just based on its headline interest rate. It is much better to set out their needs first, whether it be the notice term, where the interest is payable or how the money can be accessed, then choose the best interest paying account from these.
"For consumers not interested in making regular withdrawals, exploring the options of notice accounts or even fixed rate bonds can offer better returns. But it is important to keep some cash readily accessible for any unforeseen circumstances; a mix of accounts can often work well, offering varying liquidity and rates of interest."
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