Confused between whether you should open a high interest or regular savings account in the UK? Check out this post to know five of their biggest differences that could help you make the right decision.
Banks in the UK offer many types of savings accounts to help account holders get closer to their financial objectives. For instance, regular savings accounts have been traditionally popular for their fixed interest rate and flexibility. But some of the top banks now offer high interest accounts that significantly extend the advantages provided by a regular account.
If you are confused between the two, here are five of their biggest differences to help you make the right decision-
- Higher Interest Rate
A savings account is one of the best ways to watch your savings grow in a risk-free manner. As the name suggests, high interest accounts aim to offer better interest rates as compared to regular savings accounts.
With some high interest accounts, the interest could be as high as 0.75% AER (Annual Equivalent Rate). If you are looking for a way to deposit your savings and access the same anytime you like, the higher returns make high interest account a smarter choice.
- Monthly Interest Payment
With a lot of savings accounts, you are required to remain invested for a fixed duration to receive your interest income. For instance, if the savings account’s maturity period is two years, the interest income will only be paid after maturity.
But with a high interest account, the bank will deposit your interest income on a monthly basis. The interest will be calculated based on your end of day balance and will be deposited into your account every month.
- No Withdrawal Penalties
If you’ve ever used a regular savings account, you might know that most such accounts have withdrawal limits. The limits are on the number of withdrawals or the amount you can withdraw in a month. Withdrawals above this limit attract a penalty.
However, you don’t need to worry about any penalties or restrictions if you open a high interest account. You can easily access your funds as and when required.
- Low Initial Deposit
Most regular savings accounts in the UK have high initial deposit requirements of £500 or even more. Many people are unable to deposit such larger sums and are thus unable to benefit from a regular savings account.
With some of the top banks, you can open a high interest account with only £1. This ensures that even if you have minimum savings, you can still open a high interest account and start earning higher returns.
- Joint Account Holder Option
Joint account holding offers a lot of flexibility if two individuals want to use the same savings account, like in the case of spouses. But a lot of regular savings accounts do not come with this joint account holding facility.
A high interest savings account could be an excellent alternative as most such accounts come with a joint holding facility.
Opening a High Interest Account in the UK
Now that you know some of the main differences between a regular savings account and a high interest account, it shouldn’t be difficult for you to make a decision.
With a high interest account, you get higher returns, monthly interest income, withdrawal flexibility, and many other advantages. If you are looking for a way to maximize your spare funds, a high interest account is a better choice.