Savings account Guides

Instant access savings accounts

Updated: Wednesday 15th June 2011

By Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

Instant access savings accounts allow you to squirrel money away, but still give you access to your cash as and when you need it.

Instant access savings accounts can be a great way to get the most from your money without having to plan ahead when you need your savings.

Compare instant access accounts

In this guide we look at the benefits and drawbacks 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 is exactly what it says on the tin - a savings account which pays you interest on your money whilst giving you instant access to your cash, allowing you to make immediate withdrawals whenever you need.

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

What are the benefits?

• Instant access savings accounts generally offer better interest rates than current accounts, letting your hard-earned cash flourish.
• They make a great place to store any extra money from your current account without compromising on access to your cash.
• Because instant access savings accounts let you get to your money whenever you want, 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?

• Instant access savings accounts 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 instant access savings account, 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 that you earn in an instant access savings account, 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 information.
2. Check the ways that you can manage your account - These may include branch access, phone banking, by post or online but some products are restricted to just 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 there’s a branch close to where you live or work.
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 to move your cash to a new account and 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.