When looking for a new savings account, it can be tempting to pick the one at the top of most best-buy tables.
But, banks and building societies use all sorts of tricks to get to the top of these tables.
That means those that do are not necessarily the ones that will prove the best pick for you.
Behind the shiny facade of top rates can be a host of restrictive terms and conditions.
Each week, I put together my Star Buys table — and to make the cut, savings providers need to do far more than simply offer bumper rates.
Hidden fees: Banks and building societies use all sorts of tricks to get to the top of best-buy tables so those that do will not necessarily prove the best pick for you
But other lists of top savings rates can have more simplistic methodologies — and often just list the accounts with the best rates.
So, if you use these, make sure to follow my checklist to ensure you get an all-round excellent account that won’t prove restrictive later on.
And remember, if you opt for an easy-access account, rates are variable so the provider can alter them at any time and will not always notify you.
Check rates regularly — at least once a month — to make sure you are still getting a competitive deal.
Watch out for huge minimum balances
Top-paying accounts often have a huge minimum balance. For example, you need at least £10,000 to get a top rate of 5.1 per cent from Close Brothers Savings.
Ask yourself, if you have this much money to put into a savings account, do you really want to keep it in an easy-access account or could you lock it away for longer or even invest it?
If you think you may have to take money out for an emergency your rate could plummet — down to a lousy 1 per cent in the case of the Close Brothers Savings account.
Your £10,000 will pay you £510 a year — around £42 a month. But £9,999 in the account for a month, gets just over £8 rather than the full £42 — an expensive mistake.
Monument Bank at 5.08 per cent asks for an even higher minimum of £25,000 deposited with the bank across all its savings accounts.
On the other hand, Family Building Society Online Saver, at 5.04 per cent, pays you slightly less but you can open it with just £100.
Check when and how much you can take out
Some accounts that claim to be easy access have minimum withdrawals, like Shawbrook Bank’s 5 per cent on £1,000 or more, but withdrawals must be at least £500.
Check how long it takes to get cash
Some providers pay withdrawals into your current account instantly. With others you have to wait a day, or even two.
Beware the disappearing ‘bonus’
Some providers pay a ‘bonus’ rate for the first 12 months, but be sure when the bonus disappears or you could end up on a much poorer rate.
Post Office Online Saver pays 4.7 per cent in the first year, after which it drops to 1.55 per cent.
Others pay a much smaller bonus, so you don’t lose much when it disappears.
Watch out for limit on withdrawals
Some accounts limit the number of times you can take money out each year — in some cases as few as two.
Providers like to offer these accounts as they cost less to administer.
Bank the base rate with this quirky account
Skipton Building Society’s Base Rate Tracker bond guarantees that the rate you earn will match the Bank of England base rate
Skipton Building Society has launched a new account — with a twist.
It’s one that is worth a look if you think interest rates won’t fall far in the near future.
The Base Rate Tracker bond locks your money away for up to two years and guarantees that the rate you earn will match the Bank of England base rate — currently 5.25 per cent.
It’s riskier than a fixed-rate bond where you know exactly how much interest you will earn, but it could prove to be a better deal.
It pays a better rate than the best two-year fixed rate bond currently on offer at between 4.91 and 4.96 per cent from internet-based banks such as DF Capital, Close Brothers and SmartSave banks.
Among High Street banks, the best two-year rate is 4.75 per cent from Furness, though most pay between 4 and 4.4 per cent.
If base rate moves up or down, so will the rate you earn on the Skipton bond. But the sting is that you can’t take your money out if rates tumble.
As no one can be certain what the Bank of England will do next, I would use as much as possible of the £20,000 tax-free cash Isa allowance before considering any other bond.
