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Want to open a savings account, but are uncertain about which types might benefit you the most? High interest savings accounts are very tempting, but they do have limitations which may make them impractical for some types of savers. There are a range of saving accounts which can be used to make a little extra money from your income, and depending on what you need the account for, or over what time period, you may find that you actually prefer a savings account which has a lower rate of interest, but is more flexible and durable in the long term. Understanding all of the different varieties of saving account can help you to make an informed choice that will benefit you in the long term.
Regular savings accounts require that you put money into the account each month, in exchange for a higher rate of interest than the average. They are usually only for one year, and there are also a number of limits on how much you can save, what you can withdraw, or what you do with the money during the year. Banks may offer this type of saving account to their borrowers with the idea of bringing them into the business, and many of them also demand that you join them in other forms of account, such as a current account or a credit card. There is often a set end-date to the savings, and then your money is put into a notice-only savings account. You may also be taxed on your earnings, sometimes as much as 40%.
This is another alternative from the standard savings account, which are usually variable. The fixed rate savings mean that your money earns at a regulated amount. Since interest rates tend to change every 12 months or so, at least to a significant level, it is a good idea to treat these savings as though they were a year-only saving account, and then remove the money at the end of the year. There are several different types of fixed rate savings accounts to choose from, including ones which offer you an ‘ethical’ option, only investing in areas where the environment, human and animal rights and nature are not affected.
Small businesses, including limited companies and sole traders, are not likely to earn any money from their current accounts. This means that if you want to make more money on the amount sitting in your current account, you should move it to a business savings account. The good news for those who bring in a turnover of less than a million is that the savings are protected in the same way as for private investors. There are several savings accounts which can give you a better rate of interest than your business account. In fact, if you are a sole trader you have no need to invest in a savings account at all, but can instead put earnings from the business directly into an easy access savings account, withdrawing it as you need it.
A lot of regular savings accounts prevent you from taking out money as and when you choose. What this means is that if you put in too much money, you are forced to hold out until the end of the year, when you can extract the money. If you want a flexible account, then you could do worse than select an easy access savings account. In fact, the best option here, the Santander 123, is not even a savings account, but is in fact a current account. However, it likes to reward its users if they save money, and so you could get 3% interest on £3,000 and over if you put it into a Santander current account. You can also operate the account just like a basic current account, so you can withdraw money as and when you like. However, you do need to put in about £500 a month, and also have 2 direct debits on the account. There is a small £2 charge for using the account each month, but you can get significant savings, and the majority of people make about £10 a month from their cash back schemes.
The Post Office Online Saver account can pay you 1.4%APR, and will stick with this amount for a year. Its main downside is that it is an online account, but with more people using technology for banking anyway, this should not be a serious issue.
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