What's a Savings Account
with an 'interest rate bonus'
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Last update : July 2010
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A Savings account will pay a rate of interest, perhaps 2%. But in order for the bank or building society to attract new business they'll often attach a bonus interest rate for a set period of time, perhaps adding an extra 1.5% for between 3 and 12 months.
Obviously the higher the bonus and the longer the time period the better it is for savers.
The downside to Bonus based savings accounts - they are not on offer for long
According to research on these interest rate bonuses carried out by the private bank Investec -
- Only 36% of accounts offered the bonus rate for 1 week before the bank or building society pulled the deal, and
- 72% of the best paying accounts lasted no longer than 5 weeks
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| The conclusion to this is simple - be quick if you want the best deal. |
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| Is it worth always chasing the best deals |
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Not really unless you've got large savings of more than £50,000. Even then the interest rate received when the account is opened has a good chance of being slashed within the month. For example -
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- Open an account on March 1st with the ABC bank paying 2% plus a 1.5% bonus
- By the 1st May the bonus of 1.5% is still there but the 2% rate has been slashed to 1%
- The account then pays 2.5% and is probably uncompetitive
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| Another problem is the account opening process and the transfer of money. It should be simple but we're talking banks here which can mean the opening (and closing) process can be both fiddly and annoying. |
| Go with Fixed Rate Savings Bonds if you want a guaranteed rate |
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The only way to get a guaranteed rate of interest which cannot be slashed is to invest into a fixed rate savings bond.
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| Summary |
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Even though savings accounts which include a bonus, of 6 months or more, are good news for savers it always pays to get organised. For example, put a date in your diary when the deal expires and get ready to move your cash to an account that pays a better rate of interest.
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Current Savings Deals
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Read more in the Banking & Savings section:
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