All about regular savings accounts

They say there’s no such thing as a free lunch, and with regular savings accounts, the truth of this statement is on display in full colour. Regular savings accounts can offer terrific interest rates, sometimes even the best in the market, but they also come with a lot of restrictions.

Restrictions on how long you can save for

Beware of the nasty catch in the small print: the show-stopping headline rate normally only applies for a set amount of time. Once this introductory period ends, you can expect the interest rate to drop substantially.

Restrictions on how much you can save

There’s another big restriction you should be aware of when considering a regular savings account: the maximum amount you can save. Most regular savings accounts place a limit on how much you can deposit during your high-rate introductory period. For most accounts, £250 per month is often the maximum, although this can vary.

Restrictions on how often you save

The limitations don’t end there, we’re afraid. Most regular savings accounts expect you to put in a minimum of at least £10 a month. If you forget to put in this required amount, you may forfeit your right to the high interest rate, and your account type will be changed to one that pays a much lower rate.

You are also likely to find your money earns a lower rate if you withdraw any money before the introductory period ends. So you are effectively locking your money away, usually for a year – and may well be better off with a simple fixed rate bond.

Still… a regular savings account can be very worthwhile

If you can commit to saving a regular amount every month for the required time without needing access to your stash of cash, then a regular savings account probably is a good idea.

After all, the rates can be close to unbeatable and, as long as you save no more than £85,000, your money will be protected by the Financial Services Compensation Scheme, so there is no risk you will lose it.

Just be sure you know exactly when the introductory period ends, as the rate on your account is likely to drop significantly.

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Some important information about this page

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