This savings account beats Santander 123 by paying a best buy 3.25%. So what’s the catch? | Personal Finance | Finance
Today’s most eye-catching savings accounts pays 3.25 percent, but as with every best buy offer, there is a catch. Customers only get that rate on a limited sum of money, but some may wish to take advantage.
Last week, Santander launched a new 123 Regular e-Saver paying a fixed rate of 2.5 percent for 12 months.
One limitation is that the web-based account is restricted to existing Santander 123, Private and Select current account customers.
Another curb is that savers can only pay in up to £200 per month, or £2,400 over the 12-month term. This will give them just £32.26 in total interest. That is an increase from the previous £6.50, but hardly life changing.
Nationwide Building Society’s Flex Regular Saver also pays 2.50 percent on a maximum £200 per month deposit.
The maximum interest on this account will total £32.50 over 12 months.
The NatWest Digital Regular Saver has gone a step further by paying 3.25 percent.
That is more than four times the current Bank of England base lending rate of 0.75 percent.
The downside is that savers only get 3.25 percent on the first £1,000 in their account.
Also, the maximum deposit is £150 a month, so it takes time to build up enough funds to really benefit from that rate.
A saver who paid in the maximum monthly amount for a year would pay in £1,800 in total. Their balance would stand at £1,825.58.
They would have earned £25.58 in interest.
That’s even less than the Santander 123 Regular e-Saver and NatWest Digital Regular Saver.
Those who save more than £1,000 will get an even lower return.
READ MORE: Aldermore offering up to 2.20% interest: Do you qualify?
The NatWest Digital Regular Saver pays 0.30 percent on balances from £1,001 to £5,000, and 0.10 percent on any amount over that.
These are way, way below the March inflation rate of seven percent, which means the value of the deposit is still plummeting in real terms.
For those who need instant access to their cash, today’s best buy rate is 1.5 percent from US banking giant JP Morgan’s easy access Chase account.
That is the highest easy access rate in almost three years, said Anna Bowes, founder of savings rate tracking service Savings Champion.
Chase pays that rate on deposits up to a maximum of £250,000, with no fees, charges or loss of interest for accessing your cash.
Bowes said savers must take out a Chase current account to qualify. “However, you do not need to switch your main current account or set up any direct debits, so can retain your own bank account, too.”
Bowes said the top easy access accounts all now pay one percent or more. Cynergy Bank pays 1.20 percent, Zopa pays 1.15 percent and Tandem pays 1.10 percent.
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These are all lesser-known “challenger” banks but the first £85,000 of your cash is still protected under the Financial Services Compensation Scheme, offering security.
The big high street banks have grudgingly increased their easy access rates, but only from 0.01 percent to 0.1 percent, Bowes said. “That gives you just £1 in interest a year, for every £1,000 deposited.”
An incredible £265 billion is languishing in current accounts paying zero interest and Bowes called for more competition. “We need to encourage people to switch from the banks that are robbing them.”
Rachel Springall, finance expert at Moneyfacts, said: “Most regular savings accounts are either exclusive to new or existing current account customers, so check criteria before you apply.”
Even the very best accounts will fail to protect the value of your money in real terms as inflation rockets, says Victoria Scholar, head of investment at Interactive Investor.
“For longer term savings, you will get a higher return from stocks and shares but with more short-term risk.”
