Savers suffer penalties in over half the top instant accounts

All is not what it seems when choosing a savings account. Quick access comes at a cost.

Easy access accounts that offer savers the freedom to get their hands on their cash quickly are hiding costly penalties in more than half of cases, according to research.
 
Analysis of the top 50 instant access savings accounts by Investec found only 22 out of 50 were free of penalties, restrictions for withdrawing money, or rely on short-term bonuses to inflate returns.  
 
In the top 20, just nine were penalty and restriction-free, and for the top 10 instant access accounts only five were offering unfettered access.
 
Andrew Hagger, founder and director of MoneyComms, who conducted the research for Investec said: “Easy access savings accounts are not always what they first appear. Often if you delve into the small print you'll discover restrictions and conditions which make the product on offer far less appealing.”

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Of the top five instant access savings accounts, the analysis found one had a short-term bonus, two limited the number of withdrawals that can be made, and two are restricted to the provider’s existing customers.
 
Limiting withdrawals is a common problem, especially for savers who often choose instant access accounts because they want to be able to get their hands on their money quickly.
 
Investec’s research revealed 16 of the top 50 instant access savings accounts limit the number of withdrawals customers can make, and 10 don’t allow any further withdrawals for the year once the maximum permitted number has been reached.  
 
Providers are also limiting who can get an account offering the best rates. Eight of the 50 top instant access savings accounts are only available to people of a certain age, or current account customers of the provider.
 
Short-term bonuses are another way of enticing new savers to open accounts, but they may find very soon they no longer have a competitive interest rate on their savings.
 
Seven of the 50 savings accounts had short-term bonuses in the Investec study. The average size of the bonus was 0.34%, and on average lasted for 11.1 months.  The average interest rate for these 50 market leading accounts was 0.52%, but this will drop to 0.47% once the bonuses expire.

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 Linda Brown, head of savings at Investec, said: “When choosing a savings account, it is important to not only look at the interest rate on offer, but also the terms and conditions for accessing your money.  

“You should also look to see if a short-term bonus is being used to ‘inflate’ the interest rate, and what happens to this when it expires.”

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