Bonus rates on savings accounts can mislead savers
04 September 2009 / by Andy Davies
Because many savings account providers offer bonus rates on new accounts, savers are being urged by moneysupermarket.com to ensure their bonus rate is fixed.
The price comparison site suggests some providers will offer customers variable bonus rates in an attempt to attract new savers, but rates can fall earlier than expected.
The research shows that the average bonus rate now stands at 1.93 per cent compared 0.71 per cent two years ago, whilst the number of products with bonus rates has increased from two to eight.
Commenting on this news, Kevin Mountford, head of banking at moneysupermarket.com, believes savers should “treat variable bonus rates with caution as rates may drop quickly”, he said: “Savings rates are highly inflated at the moment because banks and building societies are still desperate for our cash.
“If you go for a deal that offers a fixed bonus you at least have some peace of mind.”
Currently, according to the price comparison site, some of the most popular easy access accounts with a fixed bonus include ING Direct’s Online Saver, which is offering a 2.70 per cent bonus (bringing the rate to 3.20 per cent) for the first 12 months, while Birmingham Midshires is offering a bonus of 2.65 per cent for the first year.
Meanwhile, Citibank’s Flexible Saver and Sainsbury’s Finance Internet Saver are offering bonus rates of 3.10 per cent and 2.90 per cent for the first year respectively.
Savers can expect to receive an estimated £90 in interest payments in the first year on accounts with an interest rate of around three per cent for the first year.
Mr Mountford urges savers to keep checking their accounts to ensure they get the best deal: “Those savers who take out bonus rate savings deals should also take note of when the bonus ends and be prepared to switch accounts once this happens. A really savvy saver can use bonuses to significantly boost their returns as long as they are willing to put in a little effort.”
Compare instant access savings accounts»
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* Income payments and returns are dependent upon the FTSE 100 Index.
| Provider | Account | Interest Rate (AER) | Term | Apply |
|---|---|---|---|---|
 The Access Bank UK » |
3 Year Fixed Rate |
2.20% per annum |
£5,000 | Apply Now > |
| Earn 2.20% fixed interest – 3 year term – Minimum deposit £5,000 – No withdrawals permitted. FSCS Protected | ||||
The Access Bank UK » |
2 Year Fixed Rate |
2.02% per annum |
£5,000 | Apply Now > |
| Earn 2.02% fixed interest – 2 year term – Minimum deposit £5,000 – No withdrawals permitted. FSCS Protected | ||||
 Vanquis Bank » |
4 Year Fixed Rate Bond |
2.40% per annum |
£1,000 | Apply Now > |
| Earn 2.40% gross/AER fixed for 4 years. Save £1,000 – £250,000. No withdrawals during the term. Individual or joint accounts available. Annual or monthly interest. FSCS Protected | ||||
The Access Bank UK » |
1 Year Fixed Rate |
1.72% per annum |
£5,000 | Apply Now > |
| Earn 1.72% fixed interest. 1 year term, save from £5,000 to £500,000, no additional deposits or withdrawals permitted, FSCS Protected | ||||
Vanquis Bank » |
3 Year Fixed Rate Bond |
1.85% per annum |
£1,000 | Apply Now > |
| Earn 1.95% gross/AER fixed for 3 years. Save £1,000 – £250,000. No withdrawals during the term. Individual or joint accounts available. FSCS Protected | ||||
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| Provider | Account | Interest Rate | Term | Apply |
|---|---|---|---|---|
 |
Up to 6 years |
|||
| Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 5% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer. | ||||
* Income payments and returns are dependent upon the FTSE 100 Index.
| Provider | Account | Interest Rate (AER) | Term | Apply |
|---|---|---|---|---|
 RCI Bank » |
Freedom Savings Account | 1.30% | Instant Access | More Info > |
| MARKET LEADING. Earn 1.30% gross/AER. Instant Access. No notice periods. Unlimited payments and withdrawals. Pay in from £100. RCI Bank are protected up to a total of €100,000 by the FGDR, the French deposit protection scheme. Manage account online. | ||||
 Ford Money » |
Flexible Saver |
1.22% |
Instant Access | More Info > |
| Earn 1.22% AER variable interest. Interest can be paid monthly or annually. Open an account singly or jointly. Minimum deposit £1. Unlimited deposits and withdrawals permitted. FSCS Protected | ||||
 AA Savings » |
Easy Saver | 1.15% | Easy Access | More Info > |
| 1.15% gross/AER. Instant Access. Free withdrawals and no notice period. Deposit from £100. Includes a fixed bonus of 0.95% gross fixed for the first 12 months. Quick and easy online application | ||||
 Aldermore Bank » |
Easy Access Account | 1.00% | Easy Access | More Info > |
| 1.00% gross/AER on balances from £1,000 to £1 million. Unlimited withdrawals without restriction or loss of interest. | ||||
Gross is the interest you will receive before tax is deducted.
AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
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