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How to choose UK bank accounts

We all want our bank to offer an attractive return on our savings, but this has become an elusive objective in recent years. UK bank accounts offer a lower rate of interest now, largely because the Bank of England has set base rates at just 0.5%. However, there are a few things that are worth taking into account.

The general rule is that you're likely to need to lock up your money for a period of time if you want to get the best savings rate. However, the Birmingham Midshires 5 Year Fixed Rate Bond pays 4.5% AER and the Vanquis Bank 2 Year Fixed Rate Bond pays 3.85% AER. This shows that financial institutions aren't sure about what the future holds, so the discrepancy in rates isn't currently that great. It may be worth putting your cash away for a shorter period of time.

The ING Direct account offers customers 3.1% AER with no restrictions on the number of withdrawals that can be made. The point to note with high interest current accounts is that the rate is normally only available for one year. It's important that you trawl the market for the best UK savings rate once every 12 months. If you don't, you'll earn just a nominal rate of interest.

The highest savings rates tend to be reserved for people who only access their accounts online. However, if you do need access to your money fairly regularly, you'll need to leave some of your money in a current account at your local branch. Also, if you have plans for your money, don't tie up your cash. If you do need your money, you'll either have to pay a penalty or may even find that your savings are inaccessible.

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