• The bond will last for anything between 6 months and 5 years and the time period is referred to as the 'term'
  
  
• The interest rate will be fixed for the term so even if official rates move higher or lower the bond's interest rate won't budge
  
  
• Usually no money is allowed to be withdrawn until the term is up. However, some bonds do allow withdrawals but an interest rate penalty must be paid, for example a loss of 90 or 180 days worth of interest
  
  
• Most bonds only allow one cash deposit when the account is opened which means no further money can be added at a future date
  
  
• The bonds are normally sold for a limited period of time, perhaps 2-8 weeks, with the better bonds (highest interest rates) often selling out within 1 week

• Fixed rate of interest - Regardless of how the official Bank of England interest rate moves over the term of the bond its interest rate stays fixed until the bond expires
  
  
• Simple products - When it comes to Personal Finance the simple products are normally the best as the banks can't hide any potential disadvantages in the smallprint - See secret number 3 - Buy simple and flexible which is one of this site's 10 Secrets to Good Personal Finance
  
  
• Adds flexibility to a savings plan - If your total savings are in excess of £4,000, fixed rate bonds can add some overall flexibility. Why not for example lock up 25% - 50% of your money in a high paying savings bond with the balance in an instant access account
  
  
• Money is guaranteed up to £50,000 - The government guarantees all savings within a banking group up to £50,000. However, many Building Societies and smaller banks are actually owned by larger banks so use the excellent www.HowSafeIsYourMoney.co.uk to see who owns what and if your money is safe
  
  
• Easy to open and run - Opening an account normally takes less than 10 minutes if done online or over the phone. Also, because money can't usually be withdrawn until the term ends the account is easy to run, ie pay cash in and forget about things until just before the bond expires
  
  
• Plenty of choice - At any one time there are probably 100+ fixed rate bonds available for savers. The trick though is to sort through the dross to find the ones with the highest interest rates - see LearnMoney.co.uk's Top 3 1-2 year Savings Bonds - Updated every Monday

• Money is locked up for the term - It's only a disadvantage if you need access. The best way to get around the problem is to only ever lock up a maximum of 50% of your total savings in fixed rate bonds
  
  
• If interest rates rise they can become uncompetitive - If the current best buy 1-year savings bond pays 4% it might become uncompetitive if the official Bank of England base rate rises 1%-2% over the next 6 months. But if you've got a sensible savings plan at work, for example only having a maximum of 50% of your savings in fixed rate bonds, this will never be a major problem
  
  
• Savings can get split up between a few banks - In the old days most savers kept their money with the one bank. But now with competition so fierce for our cash it's possible to have 5 or more different savings accounts. This can get messy (paperwork etc) unless you get and stay financially organised. See Secret 8: 10-30 minutes is all you need to get and remain financially organised

As indicated above the problem with increased competition is it can create far too much choice with 101 different savings bonds to consider. So save yourself time and check out our Best fixed rate bonds page - update every Monday.

Overall the account opening procedure is normally simple although you might be required to send some ID to the bank in question. What they'll usually ask for is a photocopy of your Passport/Driving licence as well as a recent utility bill or bank statement to prove your present address (note, mobile phone bills are normally not accepted).

Internet access isn't always available

Many people like to use internet banking to keep track of their finances however many fixed rate bonds don't offer online access, only an old school passbook.

• See - How to be safe when online banking
• Also, secret number 4 - The internet - 4 reasons why it's your financial friend which is one of this site's 10 Secrets to Good Personal Finance

Locking your money up in a savings bond, perhaps for 1-2 years is only a good idea if you've -

a) Got more than £5,000 in savings, and
b) Won't need access to all or part of it

So as I've pointed out before it's a prudent move for most savers, unless they have serious amounts of cash, not to lock up more than 50% of their cash in fixed rate accounts.

And if in doubt always go for the option that offers the most flexibility which normally means instant access for your money. For example -

• See secret number 3 - Buy simple and flexible which is one of this site's 10 Secrets to Good Personal Finance

Say you invest £1,000 in a 1-year bond which expires on the 30th June the following year. On expiry the bank or building society will deposit your cash in one of their standard savings accounts. But these usually pay a derisory rate of interest normally well under 1%.

So get organised and make a date in your diary when the term expires (or use this excellent and free email reminder service - www.remindeo.com) and transfer the money either to another high paying savings bond or an instant access account which pays a decent rate of interest.

• See Secret number 8 - 10-30 minutes a week - all you need to be financially organised - which is one of this site's 10 Secrets to Good personal Finance

• Simple - To understand and operate
• Great rates of interest - The best ones normally pay an excellent rate
• They offer plenty of flexibility - You can lock your cash up for 6 months, 1, 2 or 3+ years (again, the 1-2 year deals are normally better as for most savers as it's not a good idea to lock money up for extended periods of time)

PS. Don't forget to find the best savings deals head over to the LearnMoney.co.uk Top 3 Savings Accounts section which is updated every Monday and includes -

• Instant access
• Fixed rate bonds
• Notice accounts
• Cash ISAs
• Over 60s savings accounts
• Children's savings