The Five Categories of Savings Accounts
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by: Hughes John
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Word Count: 677
Date: Thu, 12 Nov 2009 Time: 8:17 AM
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There are five different types of savings bonds: there’s the Easy Access or No Notice Accounts, the Notice Accounts, Bond or Term Accounts, Regular Savings Accounts, and Individual Savings Account or ISA and Tax-Free Accounts.
Easy Access or No Notice Accounts are savings accounts that offer you instant access to your money at a moment’s notice, the same as taking your money out of a current account. This kind of savings bond is best for people who want to save money but need access to cash at a short notice. Easy Access accounts are very flexible and because of this they usually have a lower interest rate than other types.
Easy Access accounts can be operated either via a bank branch, by telephone or via the internet, although it can take longer to access your money with a telephone or internet based account as it may take a few days before a check is sent in or a transfer is made to your account.
The next type of savings account is the Notice Accounts. With these accounts you will need to give a notice, typically of either a month or three months. Notice accounts generally earn a better rate of interest than other types because you can’t get hold of your money as easily.
The next account is a Regular Savings Account. This category of account appeals to people who are able to make regular savings and deposit money into the account monthly. Usually you will have to make a certain number of monthly payments into your account each year in order to prevent loss of interest or closure. This type of account also tends to offer annual bonuses as interest on top of their interest rate. However, you would lose this bonus if you don’t put in an agreed amount of money each year. Some savings accounts limit the amount a person can deposit each month and most accounts limit the number of withdrawals an applicant can make yearly so this type of account isn’t really good for those who would want access to their money immediately.
Rates of interest on the Easy Access, Notice and Regular Savings accounts can change, and borrowers are often lured to put their money in because of a high initial interest rate known as a ‘headline rate’. Often the rate will be lowered after either three months, six months or a year, so read your terms and conditions carefully and check your rate at least every three months to make sure that you are getting the best return on your savings.
The fourth type of account you could put your money is in a Bond or Term Account. These accounts are best for people who put the safety of their money as their top priority. Bond or Term accounts are high interest savings accounts which offer the most competitive interest rates but would require your money to be stashed away for a period of time of usually between one and five years. This means that you won’t be able access to that money during that period and you are not usually allowed to add further funds to the initial deposit once the bond has been opened.
The last category is the Individual Savings Account (ISA) and the Tax-Free Account; these both which come free of income tax and capital gains tax. Withdrawals can be made from these accounts but to benefit from the tax savings it is better to leave your money there for a number of years. There is a maximum amount that can be deposited in any year but these are becoming more generous and tend to increase each April after the Chancellor of the Exchequer’s budget. ISA accounts do not always offer the highest interest rates but they pay off better after tax.
About the Author
John Hughes is author of this article on Saving Bonds. Find more information about Investment bonds here.
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