Major bank launches market-leading account with best savings rate – but there’s a catch
A MAJOR bank has launched a market leading account with top savings rates, but there is a catch.
After the Bank of England raised the prime rate, some banks increased the interest rate on their savings accounts.
Earlier this month, the Bank of England raised interest rates again, bringing the base rate from 4.25% to 4.5%.
That’s good news for customers looking to boost their savings as a new wave of best buy savings accounts has launched since then.
Virgin Money just launched a competitive three-year fixed cash ISA with an interest rate of 4.41%.
You can open an account for as little as £1 and deposit it in the first 30 days.
That means if you save £1,000 then after three years you will earn £141.17 interest.
But there is a downside.
Since this is a three-year fixed-rate account, you won’t be able to put any more cash into the account after the first 30 days and your funds will be locked for the next three years.
If for any reason you must withdraw your funds before this deadline, you will be charged a fee equivalent to 120 days of loss of interest on the withdrawn amount.
You can save up to £20,000 per tax year into an ISA savings account and you won’t pay tax on any interest you earn.
Compare rates before you lock in
Shawbrook Bank offers 4.37% of the three-year fixed cash ISA, however, you will need to deposit a minimum of £1,000 to open.
Savers will not be able to deposit more money once opened.
Coventry Building Association is offering a flat rate ISA at a lower rate, but only moderate and your money is only locked for two years.
Staying at 4.35% with a minimum deposit of £1 can give you more flexibility going forward.
After the two years are up, savers will earn £90.73 on a £1,000 deposit.
If you’re thinking of opening one, make sure you’ve considered which one is best.
You will have 14 days to deposit or withdraw.
Rachel Springall, financial expert at Moneyfacts, said the account “offers attractive market-leading rates” and could entice savers who haven’t taken advantage of their ISA grant.
“As might be expected for a fixed account, savers will only be able to access their cash soon by paying a penalty, in this case a 120-year interest loss penalty,” she said. day”.
“However, savers can open an account for as little as £1 and replenish within 30 days of opening the account.”
What are the alternatives to a fixed rate savings account?
Rachel adds that these types of accounts aren’t the best for everyone, and it’s worth shopping first.
“As has been the case for a few years, consumers should compare both the in and out of the ISA package while looking at both their Personal Savings Allowance (PSA) and their ISA allowance,” she said.
“Subscribing to newsletters and rate alerts is a great way to stay up to date on the latest deals and compare interest rates on offer across all the different products.”
There are several other types of savings accounts that may be better suited to your circumstances.
These include easy access accounts and regular savings accounts that allow for more flexibility when it comes to cashing out for emergency spending.
If you’re looking for a new savings account, you should check out price comparison sites.
Keep in mind your current rates, don’t waste time looking at individual banking sites to compare rates – it will take your time.
Moneyfactscompare, Compare Markets, Compare and MoneySupermarket will save you time and show you the best rates available.
These sites allow you to tailor your searches to the type of account that’s right for you.
There are five main types of savings accounts, and understanding the differences can help you narrow down your options.
- Savings accounts are easy to access – often allow unlimited cash withdrawals. However, this perk means they tend to come with a lower interest yield.
- Regular savings account – makes a decent profit but only on the basis that you pay a certain amount each month.
- Notice accounts – offer slightly higher interest rates than easily accessible accounts but you need to notify your bank in advance (up to 95 days) before you can withdraw money or you will lost profits.
- Fixed Rate Bonds – these offer some of the highest interest rates. However, if the interest rate increases during your term, you cannot transfer your money and move to a better account.
- Personal Savings Account (ISA) – you can get both easy access versions and fixed term versions and both are tax free on your interest. Check withdrawal fees and see Isas for Life if you’re between the ages of 18 and 39 and are hoping to buy your first home or save for retirement.
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