A MAJOR bank has launched a market-leading account with a top savings rate, but there is a catch.
Following the Bank of England’s base rate hikes, several banks have upped the rates on their savings accounts.
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Earlier this month the Bank of England hiked interest rates again, taking the base rate from 4.25% to 4.5%.
It’s good news for customers wanting to boost their savings as a wave of new best buy savings accounts have launched since.
One account that has recently launched and is currently market-leading is Virgin Money’s three-year fixed cash ISA.
An ISA is a type of savings account where you can save up to £20,000 each year without being taxed – and some accounts even offer free cash top ups too.
New customers can open the account with just £1 and can get a high 4.41% in interest.
Over three years, if you saved £1,000, you’d earn £138.22 in interest.
However, there is a catch as customers can only deposit money within the first 30 days of it opening – so you’ll need to be quick.
After 30 days, you won’t be able to deposit anymore and boost your savings even further.
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Deposits are unlimited within that timeframe though.
Savers will also be able to withdraw whenever they like though they can’t put the money back in.
Any withdrawals made within the fixed rate period could incur a charge equivalent to 120 days’ loss of interest on the amount withdrawn.
This deadline is common for lots of cash ISAs have some form of deposit restriction.
In comparison, Shawbrook Bank offers 4.37% on its three-year fixed cash ISA however you’ll need to deposit a minimum of £1,000 to open it.
Savers won’t be able to make additional deposits once it’s open.
While Coventry Building Society is offering a fixed rater ISA for 4.35% with a minimum deposit of £1.
After 12 months, savers would earn £92,91 on a £1,000 deposit.
If you’re thinking of opening one, make sure you weigh up which is best.
You’ll have 14 days to deposit or withdraw the money.
Rachel Springall, finance expert at Moneyfacts said the account “offers an attractive market-leading rate” and may well entice those savers who are yet to take advantage of their ISA allowance.
“As may well be expected for a fixed account, savers will only be able to access their cash early by paying a penalty, in this case a 120 day loss of interest penalty. However, savers can open the account with as little as £1 and make further additions for 30 days from account opening.”
What are the alternatives to fixed-rate savings accounts?
Rachel added that these sorts of accounts aren’t best for everyone and it’s worth shopping around first.
She said: “As has been the case for a few years, consumers should compare both rates within and outside of an ISA-wrapper while considering both their Personal Savings Allowance (PSA) and ISA allowance.
“Signing up to newsletters and rate alerts is a great way to keep on top of the latest deals and compare the interest rates offered across all the different products.
There’s a handful of other types of savings accounts available to customers which might better suit your circumstances.
These include easy-access accounts and regular savings accounts which allow greater flexibility when it comes to withdrawing your cash to spend on emergencies.
Of course, if you’re looking for a new savings account it’s always worth having a browse on price comparison websites.
With your current rates in mind, don’t waste time looking at individual banking sites to compare rates – it’ll take you an eternity.
Moneyfactscompare, Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
There are five main types of savings accounts, and understanding the differences can help you narrow down the options.
- Easy-access savings accounts – usually allow unlimited cash withdrawals. However, this perk means they tend to come with lower interest returns.
- Regular savings accounts – generate decent returns but only on the basis that you pay in a set amount each month.
- Notice accounts – offer slightly higher rates than easy-access accounts but you’ll need to give advance notice to your bank (up to 95 days) before you can make a withdrawal or you’ll forfeit the interest.
- Fixed rate bonds – these offer some of the highest interest rates. However, if interest rates increase during your term you can’t move your money and switch to a better account.
- Individual savings accounts (ISAs) – these can pay high interest but come with high withdrawal fees. But, Lifetime Isas are great for anyone aged 18-39 hoping to buy a house or save for retirement.
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