'Easy access savings' may sound self-explanatory, but there’s more to these accounts than meets the eye. To get to grips with what easy access savings accounts are and how to determine the best instant access savings account for you, read on.
Easy access accounts are ideal for an emergency fund or those who are just starting to save. They’re the most flexible type of account in that they allow savers to take back their invested cash and add new money in without having to ask permission from their provider first, while hopefully making it a bit less tempting to spend the money in these separate accounts. One of the most important questions anyone interested in such an account may ask themselves is: what would be the best instant access savings account for me?
To start answering this question, you will first need to determine what kind of account you want. To that end, we've looked into all you may need to know about these savings products, starting with the basics.
Easy access accounts allow you to make additions and withdrawals without having to give notice to your savings provider or wait for a certain fixed period of time to end. That said, this doesn’t necessarily mean that all accounts provide unlimited access – some will limit the number of withdrawals you can make in a year, so it's always wise to look closely at the terms and conditions of an account before making your choice.
The best easy access savings accounts are arguably the ones that can offer a high rate of interest as well as unrestricted access. Make sure to check the details of any account to see if it will allow only a certain number of withdrawals or comes with a penalty restriction, and pay attention also to the account opening and management options – unlimited access won't be of much help in an emergency if you'd need to drive to a faraway branch to get your money, for example.
The vast majority of easy access accounts have variable rates, which means the interest rate you are offered at the start can change over time. You'll notice that the interest rates on easy access savings accounts tend to be lower than on notice or fixed accounts. That's because you have to make a choice: do you want the highest savings rate, or quick access to your funds? Providers won't offer both, otherwise they'd never get people to sign up for a fixed rate bond.
One key thing to look out for when choosing a savings account is whether or not the rate includes a bonus. A bonus-free account means the rate you see is what you get, but remember that rates in this sector tend to be variable and can change over time.
When you get an easy access account with a bonus, however, the bonus amount is almost always fixed for a certain amount of time, usually a year. So, you won't have to worry about your interest rate falling below this level for the allotted time, which can offer peace of mind if you’re concerned about variable rates falling in the near future. They tend to offer comparable headline rates to bonus-free accounts, and have similar minimum investment limits and management options, so aside from the additional security of the guaranteed bonus, there’s little to differentiate them.
The downside of accounts that come with a bonus is that such deals are time-sensitive. The bonus will be deducted from the headline interest rate after the fixed period ends, so your rate of interest will reduce by a potentially quite substantial amount. That’s why anyone considering an instant access account with a bonus should review their rate when the bonus expires and see if they can switch to a better deal – though the variable nature of easy access accounts means savers would be wise to review their rate on a regular basis anyway. Find out by reading our handy guide: Is a bonus account right for you?
So, why get an easy access account at all? Well, these accounts are ideal for those who aren't sure if they will be able to resist accessing their savings, as well as those who want to be able to access their money in the case of an emergency; for example, if their washing machine needs repairing or their car breaks down. They can also be perfect if you want to start a savings habit, but aren't sure if you can fully commit.
No other account type offers the freedom that instant access gives, and a lot of accounts will come with low investment minimums, which means you could in some cases just put in a single pound to start saving. Of course, the more you manage to put away, the more you'll be able to earn in interest, but there's no pressure to keep saving after your initial deposit.
That said, you may not want to keep your emergency pot too small. It's generally considered prudent to have three to six months' salary in savings, as a back-up in case you lose your income unexpectedly. While some of this back-up money may be fine in a notice account, you may want to put enough in an easy access savings vehicle to keep you going for a month or two.
So, if you want to dip your toe in the savings waters, are looking to put funds aside for an emergency pot (in case your car breaks down, for instance), or simply don't know when you'll want to make use of the funds again, don't let your money languish in your current account (unless it's a high interest current account that you're specifically using for a small savings pot, but that's another story). An easy access savings account might just be the best choice for you.
Just bear in mind that not all easy access savers are created equal, so you should always look at the terms and conditions of the account you're interested in. Additionally, savings rates aren't going to be the highest on these accounts, so if you've got a substantial pot of money, consider splitting it between easy access and fixed savings to get the best of both worlds.
If you're still not sure, you could always consider the alternatives. You could potentially get a higher interest rate while still retaining unlimited access by looking at high interest current accounts, as mentioned above. The only downsides to these accounts are that they will usually require a certain amount of regular income and activity (such as multiple direct debits and regular monthly funding requirements), and only pay interest up to a certain balance, so if you want to get interest on more than £2,000-3,000 you could still be better off with a savings account.
The same low investment restriction applies to regular savings accounts. These tend to offer higher interest rates, but you'll only be able to put away maybe £50 to £500 per month. Additionally, most regular savers usually only allow you to access your funds again after a year, so they're not suitable for emergency pots.
Another easy access option is a variable rate cash ISA. These accounts may not offer the best interest rates, but they do allow for tax-free saving, and there are both notice and no notice options available depending on your needs.
As you can see, there are a lot of things to consider when deciding on what kind of savings account might be right for you. Just remember that there's nothing stopping you from getting a high interest current account for your everyday banking and then setting your surplus money aside in an easy access savings account.
Note that instant and easy access savings accounts are often used interchangeably, but there are some key differences. Typically, accounts that offer instant access are those that can be managed in branch or come with a cash card, so you'll be physically able to withdraw your money instantly by visiting your provider or an ATM. With accounts that are easy access or no notice, you can still get access to your money easily, but you'd need to transfer it to a current account first.
Broadly speaking, an instant access account will transfer your funds out instantly, so you could see them arrive in your current account within minutes, while an easy access account (otherwise known as a no notice account) can take a bit longer. However, if you do your banking online, it's likely that you won't see that much of a difference between the two.
For those who want to be completely certain that they'll be able to access their funds and take money out of their savings account quickly, keep an eye on the 'Notice / Term' column of your search results. If it says 'None', you're looking at a no notice/easy access account, so for extra speedy access you'll want an account that says 'Instant' instead. Just remember that the best instant access accounts may not be the best easy access account overall, so you'll have to ask yourself how important instant access is to you.
Most easy access savings accounts pay out interest only once a year, either on a set date or on the anniversary of the account opening, although there are some accounts that give you the option to get interest added to your savings (or paid away into your current account) every month. This information can be found by viewing the Further Details of an account.
Opting for a savings account that pays interest monthly could be a great way to supplement your income, particularly if you’ve got a substantial savings pot.
However, you may have noticed that for some accounts, there's a difference between the AER and the gross interest rate on offer.
The reason for this is explained in more detail in our guide on the subject, but what it comes down to is this: the AER, or annual equivalent rate, looks at more factors than the gross rate does. The AER assumes that you're going to keep your money in the account for a year and benefit from compound interest (the interest you receive on the extra funds you accumulate via interest in the meantime).
So, if there's an account that pays interest on a monthly basis and allows compounding, the AER will be slightly higher than the gross rate, because it counts the funds that get added every month thanks to interest, whereas the gross rate does not. In the same way, additions made throughout the year will add to your interest pay-out, but won't warrant the full yearly rate of return.
This means that if you put £1,000 in an account which pays an annual interest rate of 1%, you would get £10 after a year if you do nothing. If, instead, you add another £1,000 after exactly six months, you would have interest of £15 after one year. Then, if you leave your money in there and the interest rate remains the same, you would have £2035.15 in the account after two years thanks to compounding.
Alternatively, if you have £1,000 in an account paying an annual interest rate of 1% on a monthly basis, you would end the year with approximately £1,010.05. This may seem like a small difference, but could be much more significant for larger sums.
Easy access accounts with a bonus can further complicate this situation, as not all of them will be for 12 months. Sometimes they will have specific end dates, which may not line up with when interest is paid, or the interest may be paid on a specific date while the bonus ends later. If the fixed bonus ends before yearly interest is paid, the AER will be lower than the gross rate.
Note finally that any interest over £1,000, taking all your savings into account, will be liable to taxation per year, with only interest under this amount being tax-free to basic rate taxpayers, thanks to the Personal Savings Allowance (there's a £500 limit for higher rate taxpayers, with those in the highest tax bracket getting no tax-free buffer at all).
Now that you have a clearer idea of what easy access accounts are, you may want to know how to choose between the top deals. Doing an easy access savings accounts comparison can be as easy or comprehensive as you want it to be.
For instance, you may only have £1 to invest at the start, in which case it's likely that not all the top rates will be available to you. On the other hand, if you've got a large amount that you want to retain access to, you could just go for the number one account in the charts.
There will be a few other things that people look out for when deciding, such as:
If you'd like to do your banking in branch, there's a chance that you may need to look away from the best instant access savings account rates, as these tend to be reserved for those who do their banking online. Luckily, our search results should make it easy to see which deals can be opened in branch. Then it's just a matter of seeing if the rate is up to your standards, the minimum investment limit is something you can live with and you can manage the account in branch as well. Of course, if you’re comfortable online banking, you can usually take your pick of the deals, as the best online easy access savings rate is often the best overall.
While there are still specific accounts for those who are over 50 or even 60, there are not as many as there may once have been and they tend not to pay the exclusive rates that they once did. If you desperately want one of these accounts, your best bet would be to contact your local banks or building societies. Otherwise, you may want to consider a traditional savings account, as they are likely to rival the rates of exclusive accounts and are simple to compare.
The overwhelming majority of easy access deals, including the very best instant access savings accounts, will have variable rates. There are, however, rare occasions when a fixed rate easy access deal gets released. These products may be in the guise of fixed bonds with flexible access options, and will usually be very limited and only available for a year, after which the funds may be transferred to a variable rate easy access saver.
Because they are so rare, you may think that they will be wildly appealing, but the rates on these accounts won't necessarily be market-leading. So, if you're looking to open an instant access account, don't wait around for the white whale of a fixed rate deal, as you may never find it. If you'd prefer the security of a fixed rate, you might want to consider a fixed bond instead - provided you're happy to restrict your access.
Considering all these different criteria, it's easy to see that there is not one single best easy access account. You will have to compare instant access savings accounts to find the one that best suits you. Thankfully, our search results are a great place to start, so it hopefully won't be too difficult to find what you're looking for.
Ready to find the best savings rate for you? Use our search tool to get started.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.