Savings Accounts Tips.
1. If you have spare cash don't start saving with a savings account. First, use it to pay off debts, which usually cost much more in interest than savings will pay out. In particular use your spare cash to reduce your mortgage debt if you can.
2. After that consider Cash ISAs, which are effectively tax-free savings accounts, and Regular Savings Accounts, where you put money away each month in return for a higher rate, as both should pay you more interest.
3. Some accounts have high interest rates at launch, that subsequently drop to uncompetitive levels. For active consumers, you can shift the cash to a better payer as soon as the bonus ends, it's no problem. However, those who like an easy life should avoid them.
4. Obsolete accounts ( accounts closed to new customers) can pay particularly poor interest. Clearly, you won't necessarily know which rates will stay up and which will plummet at time of purchase. So keep an eye on whether your provider is keeping up. A few companies now offer products linked to the Bank of England base rate to protect savers.
5.Some banks attract you in with a high rate, then later lower the rate down to almost nothing, and try to sell another similarly named account so you think you're still earning decent interest. Always know your account's exact name.
6. Banks quote one of two different interest rates. The Gross rate is the flat amount paid; while the Annual Equivalent Rate (AER) takes into account interest compounded over the year. Check which rate you're being quoted and compare like with like.
7. Remember interest rates are usually quoted without tax, but for basic rate taxpayers 20% of the interest earned goes to the taxman; for higher rate taxpayers it's 40%. Back....