Top savings deals increasingly come with strings attached that can slash interest rates

Many top savings accounts now come with restrictions that can trip up unwary savers, such as reduced interest rates and other complications.

Savings experts say deals with strings attached are becoming more common on easy access accounts, fixed rate bonds and notice accounts. 

These conditions include limits on how many withdrawals can be made, time-limited bonuses and rules that customers have to take out more than one product to get top interest rates.

Many savings accounts now contain conditions which may mean savers lose out on top rates of interest for breaking terms of the deals

Starting with easy access accounts, 14 of the top 20 deals now have some sort of restriction, according to financial data firm Moneyfacts.

The top easy access deal, the Online Bonus Saver from HSBC, pays 2.97 per cent interest a year. 

But if you take any money out of the account your interest rate for that month falls to 0.65 per cent. You also have to have an HSBC current account to be eligible for the deal.

>> Savings rates: See top deals on our best-buy easy access tables 

Another top deal which pays 2.81 per cent, from Al Rayan Bank, is only open to savers who are existing customers.

The next-best deal pays 2.8 per cent a year, from Tipton & Coseley Building Society. 

But this deal only allows three withdrawals a year, and also only pays the full 2.8 per cent rate on balances of more than £25,000 – below that, savers earn 2.5 per cent instead.

Next in line is the 2.75 per cent on offer from Cynergy Bank’s Online Easy Access Account – but this includes a time-limited bonus of 0.15 per cent for the first 12 months, after which point the rate drops.

Rachel Springall of Moneyfacts said: ‘If you look above the rate of 2 per cent, most easy access accounts now have some sort of restriction.’

Banks are adding restrictions to savings deals so customers leave more cash in the accounts, which is great for firms but may be less useful to savers

A spokesman for Tipton & Coseley Building Society said: ‘It is not an unusual practice to have limited access to this type of account. 

‘For us, there is a realisation that it still allows flexibility and access to funds when needed. We are looking to provide options and still provide people with a good rate of return.’ 

Strings attached to other types of savings deal

These restrictions are creeping in with other sorts of savings deal too, such as notice accounts and fixed rate bonds.

Anna Bowes, of Savings Champion, said: ‘Notice accounts used to be more easy access in how they worked, and if you wanted to take cash out there would be a penalty to pay in terms of losing some interest. Now very few of them allow any access to the money at all within the term.’

Four of the top five notice accounts allow no withdrawals at all during the term, according to Savings Champion.

Bowes added: ‘The same is true with fixed rate bonds, which mostly will not allow access at all before maturity. Back in the day there were a number of providers that would allow this.

‘With many deals savers have to understand there may be things that mean you might not earn as much as you would do otherwise.’ 

Why is this happening?

Savings experts say banks are bringing in more restrictions on top deals to keep more of savers’ cash on their books for longer, which means they earn more money themselves.

For example, banks offering easy access accounts know savers can take cash out whenever they like with little predictability. Money taken out of these deals means less cash for the banks themselves to lend out or invest.

So putting restrictions on these deals encourages savers to take their cash out less, which is good news for banks.

Bowes said: ‘I would suggest it is to limit transactions, there is less turnover on that cash. That means less activity, so the money is stickier and they might be better able to invest it, and there will be less administration involved.’

Some of the savings account restrictions are also due to the size of firm currently bringing out the best deals, according to Rachel Springall of Moneyfacts.

‘The way the market has changed is there are more challenger banks in the best buy tables,’ Springall said.

‘Because of their smaller size, these banks are more aware of the flow of money within their businesses. 

‘With easy access accounts there is no guarantee the money will still be there in a day. In order to set a good interest rate, they have to put these restrictions on their accounts.’

This post first appeared on Dailymail.co.uk