Sensational Savings For Summer Savers
Where's the best place to put your hard-earned cash this summer?
This article has already been emailed to Fools as part of our Summer Lolly campaign.
Are you carefully squirreling away money for your summer holiday this year? If you are, I'm sure you want to make the most of your hard-earned cash. But where's the best place to put it?
We already know savers have done pretty well out of the credit crunch, with a number of companies hiking savings rates to raise much needed cash.
But the current economic turmoil has undoubtedly boosted the popularity of building societies with UK savers. As my Foolish colleague, Cliff D'Arcy, pointed out in Northern Rock: Are Building Societies Safer? building societies are not funded in the same way as the Northern Rocks of the banking world.
Building societies tend to be less reliant on borrowing through the money markets to finance their businesses. Instead, they find much of their funding through deposits from savers.
So, as the credit crunch chugs on, it's not surprising that societies have experienced record savings inflows over the last eight months. The latest figures show they took in a massive £1.8 billion* in savings during April alone, which was a roaring month for cash ISAs too.
That sounds like an awful lot, particularly when you realise that -- at the same point last year -- savers put just £1.35 billion into building society accounts.
But are you really better off going for a savings account with a building society or a bank?
If you want easy access to your money, here's the cream of the building society crop:
Best Of The Building Societies
Premier Bonus Issue 3
4 per year
West Bromwich BS
12 per year
Rainy Day Savings Issue 3
Up to £1K total in first year
*Manchester BS Premier Postal Issue 2 also available at 6.12% AER. Minimum deposit is £1,000.
At 6.51%, Manchester Building Society offers a truly market-leading account when it comes to great rates. But you should be aware of two things: firstly, the account offers a 1% bonus for the first year, so you may need to switch your savings to a more competitive account once the introductory period is over.
And secondly, although the account is marketed as instant access, you only get four free withdrawals a year. Extra raids on your account will result in the rate dropping to the same paid on Manchester's Premier Instant Account. Given that the tiered rates on this account range between a pitiful 1.01% and 2.96%, it's vital you avoid breaking the rules or you'll be left with a dud account.
Both West Bromwich and Chelsea offer lower rates, but these accounts come with a valuable interest rate guarantee. West Bromwich promises a rate which is at least 0.25% above the base rate until July 2009, while Chelsea guarantees to match it for the first twelve months after opening the account.
While it's true building society savings accounts are scoring highly in the popularity stakes, do they measure up well with the best from the banks?
Best Of The Banks
e-Saver Issue 2
All are penalty-free
Kaupthing Edge Savings
All are penalty-free
Free withdrawals permitted in July only
Level-pegging with Manchester Building Society, Birmingham Midshires also offers a table-topping 6.51%. But this time there are no tricky rules on withdrawals, so it may have the edge.
Kaupthing Edge and Alliance & Leicester are the tiniest fraction behind at 6.50%. With Kaupthing you get a long-term guarantee that the rate will remain at least 0.30% higher than the base rate until 1 February 2012.
Meanwhile, Alliance & Leicester's rate includes a 0.88% bonus which disappears after 31 August 2009, so you may need to shop around once this time is up. And -- don't forget -- one month's interest will be lost if you take cash out at any time except in July.
It's clear neither the banks nor the building societies are miles ahead in the savings race. Both can offer us pretty competitive accounts, although there may be one or two catches to look out for.
But if the relative security of keeping your savings with a society is important to you, it's great to know you don't have to sacrifice a fantastic rate in return.
*Latest figures from the Building Society Association.