Online savings accounts have become a popular way for people to manage their money from the comfort of their own home. The major advantage, compared with a traditional account, is that you can deposit and withdraw your money wherever you are, as long as you have an internet connection – there’s no need to visit your branch and you can manage your account outside of normal opening hours.
Online savings accounts come in all forms, including instant access, fixed bonds, cash ISAs and regular savers. When choosing an online savings account, your considerations should be much the same as with any new account: will you be able to access the money when you need to, and will you be making a good return from your cash?
Instant access is a popular form of savings account, as it allows the customer to dip into their savings whenever they want to and make deposits whenever they can. The rates are variable, meaning they’re tied to the Bank of England base rate, although there is sometimes an introductory bonus which offers a more favorable rate – usually for the first 12 months or so. It’s also important to read up on the fine print – some providers won’t pay interest in months when a withdrawal is made, for instance.
Notice savings accounts require you to warn your bank in advance if you intend to withdraw money, but they tend to pay better interest rates than instant access. These are great for people who know they won’t need access to their savings for a set period of time, and in an emergency you can usually withdraw it anyway – although you’ll likely incur a penalty on any interest you’ve earned. As always, look at the terms and conditions and see if other types of savings account might be more suitable.
Isas are another commonly-used savings account, and offer some of the most competitive deals on the market – the only real catch is that you can only invest a certain amount every year (£11,520 – currently £5,760 in a cash Isa and the rest in stocks and shares). Isas are tax-free, so none of the interest you earn goes to the government – this alone makes Isas one of the best ways to invest your money! They come in the same varieties normal savings accounts come in, such as instant access and fixed rate.