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Instant access savings accounts - an introduction

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Instant access savings accounts are very popular. We weigh up the pros and cons and show you what to look out for… (Updated 18/8/09)

Instant access savings accounts can be a great way to get the most from your savings without losing fast access to them.

Compare instant access accounts

In this guide we look at the benefits and disadvantages of instant access accounts and show you what to look out for in order to get the best deal.

• What is an instant access savings account?
• What are the benefits?
• What are the disadvantages?
• What's available?
• What should I be looking out for?

What is an instant access savings account?

An instant access savings account (IASA) is exactly what it says on the tin – a savings account which pays you interest on your savings whilst giving you instant access to your money, allowing you to make immediate withdrawals whenever you need the cash.

Perfect for keeping a reserve of emergency cash in, you can set up a standing order from your current account and use your IASA to save for that rainy day. Available from a wide selection of banks and building societies, it’s easy to open an IASA and transfer your funds to get the best rate possible.

What are the benefits?

• IASAs generally offer better interest rates than current accounts, enabling your hard-earned cash to grow faster.
• If you have some spare cash in your current account that you rarely touch, but want to be able to access it immediately if you need it, opening an IASA could be a profitable move. For example, leaving £1,000 in most current accounts will earn you almost no interest at all, but move this cash to an IASA paying 3% and you could earn an extra £30 a year.
• Because IASAs offer instant access, there is no need to go through the processes normally associated with withdrawing cash from regular savings accounts – no notice period is required and you are not (usually) penalised for withdrawals.

What are the disadvantages?

• IASAs are not as practical as current accounts on a day-to-day basis. They cannot usually be used for direct debits or paying bills and most do not offer cheque books or cash cards. To use your IASA, you will usually transfer funds to and from it through your current account.
• Although you have instant access to your money, it may still take up to three working days to transfer money between accounts if they are held with different banks.
• You are taxed on the interest than you earn from IASAs, so if you have a fair bit of cash that you won’t need immediate access to, you would be much better putting it away in a tax-free Cash ISA.

What's available?

What should I be looking out for?

There are plenty of things to consider when choosing a suitable instant access savings account. Here are our top three tips for getting the best deal:

1. Know how your interest is earned and read the small print - Many savings accounts come with catches – for example they may restrict the number of withdrawals you make in a year. Always read the terms and conditions and check out our guide to savings restrictions for more examples.
2. Check the ways that you can manage your account - These may include by branch, phone, post and online but many products are restricted to a few of these. If you are comfortable handling your money on the internet, then you can benefit from using one of the many online accounts which often offer the highest interest rates. If you prefer human contact however, be sure to check the number of local branches.
3. Find out how long your interest rate lasts - Many banks offer introductory rates which drop significantly after six months or a year. If this is the case you can still enjoy the bonus rate while it lasts, just ensure that you set yourself a reminder of when the bonus period ends and when it does move your cash to a new account to get the best available rate.

To find the best deal, it’s crucial that you compare deals from a variety of providers. Check out our best buy tables now, or work out how much interest you could earn with our savings calculator.

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