Savings Accounts: Conditions Explained
The higher the rate of interest, usually the more strings there are attached. These usually are in one of a few different areas:
- Condition 1: there is a ceiling on how much you can invest. This may be a limit to how much you can start off with in the account, or a limit to how much you can save per month or year, or a limit on the total balance.
So for instance if you can only save £500 a month at the high interest rate, you will be better off if you have many thousands to save with an account elsewhere with a slightly lower interest rate but no cap on how much you can save, so this is something to be aware of.
- Condition 2: access to the account
Another classic limitation that is set on higher interest accounts is with regard to accessing that account, and usually with regard to withdrawals.
Many accounts will say that you can only make one withdrawal per month / year or some sort of time period, and if you access more than that the interest rate drops to the normal rate for their standard savings product and you lose out on the flagship rate.
So if you need to keep your money locked up for a certain time, then you will need to be aware of this is OK for you before getting that account.
- Condition 3: bonuses
Many accounts make up their headline rate with the addition of a bonus on top of the usual amount, this could say 'if you make no withdrawals during the year you get an extra 2% interest at the end of the year' or similar.
- Condition 4: fixed payments
This condition says that you must pay a fixed amount into the account each specified period, e.g. £100 a month, to keep the high rate of interest
- Condition 5: headline rate only applies to a certain amount
Another trick that banks use to get you to invest is to offer a really high headline rate, say 10%. If you see this then you know either that interest rates have gone up massively since this article was written, or that there are conditions attached (or perhaps you're a multi-millionaire with access to private wealth management facilities!)
Anyhow, when massive headline grabbing rates are offered, in most cases they will only apply to a small sum invested. It could be capped at an amount - say the first £1000 gets that interest. Or it could be that only money you put in at month one gets the full interest rate, and it decreases gradually each month.
So in this and a variety of other ways conditions on an account can make it much less attractive given your savings circumstances, so always check out the stipulations and rules of an account before investing your money in that particular savings accounts.
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