Savers lose out from fine print of best savings deals

Half of the top easy-access deals have often-overlooked rules, which savers must be aware of.

With interest rates hitting new rock bottoms, savers are hunting the market for the best deals - but are being warned to watch out for fine print that might wipe out their limited returns.

Research by wealth manager Investec and analyst MoneyComms found almost half of the top 50 easy-access accounts have often-overlooked rules and limits that could cost unwary savers.

Some include bans on taking out large sums of money. Others use short-term bonus rates to lure in savers who forget and stay even once the rate falls to a much lower level.

More than a third of the top 50 accounts restrict savers’ access by limiting how many withdrawals they can make. Interest penalties are levied on those who do by more than one in five accounts.

Bonuses are attached to four of the top 50 accounts. These boost the interest rate on the accounts and can often take them to the top of best buy tables. But they don’t last for long, on average a year, before falling way below the rates offered by market leaders.

Savers searching a market of ultra-low, and falling, rates on savings accounts looking for a safe place to hold their cash can jump at headline figures which are far from the best returns overall, or that make accessing the cash tricky.

• No sign of ISA season boom for cash deals
• Savers shun fixed-term deals for easy access during pandemic
• Disillusioned savers pull £6.3 billion from NS&I in a month

Andrew Hagger of MoneyComms said: “Most savers don’t want to have to worry about a limited number of withdrawals or access penalties, they simply want an account they can pay in to and withdraw from whenever they like with no strings attached and no sneaky terms and conditions.”

An alternative is to look at higher interest paying current accounts, or those offering free perks such as rewards for switching. According to financial experts Moneyfacts, these attractive offers are once again being offered by banks and are proving popular.

Halifax had the highest net switching gains between 1 July and 30 September 2020, and in most of this time it offered a £100 switcher incentive to new customers. 

One of the best deals on the market for consumers looking for a high interest rate is from Virgin Money – on its Current Account, savers will earn 2.02% AER on balances up to £1,000. The overdraft charges 19.9% EAR, around 20% less than some other alternatives on the market. If consumers switch using the Current Account Switching Service they will get a free case of wine as well as £50 to donate to any Virgin Money Giving charity.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Consumers may feel like there is little incentive to switch right now, but it is always worth reviewing their current account to see if it is working hard enough for them. 

“The landscape for current accounts has changed immensely over the past year, with offers withdrawn, interest rates cut and overdraft flat fees abolished. Banking customers may find that they could get a better deal by switching, but the best account for them does depend on how they spend or save.”