ING Direct has increased the rate on its main savings account – the ING Direct Savings Account.
This account now pays 3.15% AER in interest and is also a true instant access account. In other words, you can make as many withdrawals from the account as you like and you won’t be hit by any penalties if you do take money out.
What’s more, the minimum balance on this account is just £1.
3.15% is an attractive rate for an instant access account and is only a tiny bit lower than the Post Office’s market-leading Online Saver account which pays 3.17% AER. Read more in Post Office leads the market with new easy access savings account.
Bonuses
However, there’s a case for saying that the ING Direct account is better than the Post Office account. That’s because ING Direct’s bonus is bigger at 2.61% whereas the Post Office bonus is only 1.52%.
If you don’t know about bonuses, they’re pretty simple. The idea is that an account comes with a variable interest rate which is then boosted for a period of time by a guaranteed bonus. On most accounts, the bonus period lasts for a year.
So the ING account has a variable rate of 0.54% which is then boosted by a one-year 2.61% bonus. When you combine those rates together, you get a 3.15% interest rate.
[SPOTLIGHT]Many people dislike bonuses. That’s because ING will almost certainly slash the rate you receive when the 12-month bonus period ends. You’ll probably just receive 0.54% after the first 12 months.
However, a bonus also has an advantage. It provides a floor for the savings rate. Because the 2.61% bonus is fixed, ING can’t cut the rate you receive below 2.61% for the first year.
Yes, the Post Office account also has a bonus, but as it’s smaller – 1.52% - the floor is also lower.
Competition
Let’s see how the ING account stacks up against the other leading instant access savings accounts.
Top instant access savings accounts
|
Account |
Interest Rate AER |
Withdrawal limits |
Minimum balance |
Bonus |
|
3.17% |
None |
£1 |
1.52% for 12 months |
|
|
3.15% |
None |
£1 |
2.61% for 12 months |
|
|
3.06% |
One free withdrawal per year. |
£1 |
1.52% for 12 months |
|
|
3.06% |
None |
£1000 |
2.06% until 30/06/13 |
|
|
3.01% |
None |
£1 |
1.36% for 12 months |
You’ll see from the table that the Nationwide account only comes with one free withdrawal per year. If you wish to make any further withdrawals, you’ll have to pay a penalty. All the other accounts offer unlimited withdrawals which makes them much more attractive in my view.
So for me, the top two accounts are the Post Office and ING Direct accounts. I suspect most people will want the slightly higher rate offered by the Post Office, but if you like the idea of having the highest guaranteed interest rate floor, you’ll prefer the ING account.
Getting a higher rate
Of course, you may want a higher rate than 3.17%. If that’s the case, a fixed rate bond could be the answer. If you go for a one-year bond, you won’t be able to get your money for a year, but you should receive a higher interest rate as compensation.
Let’s look at the best fixed rate bonds that last for one or two years:
Top fixed rate bonds
|
Account |
Interest rate (AER) |
Fixed rate period |
Minimum deposit |
|
3.75% |
2 years |
£1 |
|
|
3.7% |
2 years |
£1000 |
|
|
3.45% |
1 year |
£2000 |
|
|
3.4% |
1 year |
£1000 |
More on savings:
Santander launches inflation-linked savings bond