What is a savings account?
A savings account is an account designed to be a place for you to store money that you don’t intend to use every day, and you earn interest on credit balances. Different to a bank account, you can’t set up standing orders or direct debits from a savings account, however, many savings accounts offer a debit card facility.
How do savings accounts work?
Money that you pay into your savings account earns you interest. This is because the bank loans that money to other customers, at a higher interest rate than they pay you. This makes the bank money, and means they are able to pay you interest on the money you are saving. Usually, the longer you agree to lock away your savings, the higher the interest rate the bank will pay you.
What are the advantages of savings accounts?
Savings accounts are a great way to save money and earn interest on your savings. Depending on the type of savings account you choose, the interest you earn can be tax free, meaning you maximise your savings.
What are the disadvantages of savings accounts?
Depending on which savings account you choose, there can be restrictions on how quickly you can get access to your money, with penalties charged by the savings account provider if you need to withdraw some of your money quickly. It’s a good idea to check the terms and conditions of the savings account before you apply, to make sure that the account you choose is right for your circumstances.
What types of savings accounts are there?
There are lots of options available when it comes to choosing a savings account. These options include ISAs, easy access savings accounts, notice-savings accounts, regular savings accounts, fixed-rate bonds, monthly interest accounts and Help to Save accounts. It is a good idea to research all options carefully before making a decision, so that you choose the savings account that’s right for you.