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How to get 5% interest without tying up your savings for years

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Written by: Emma Lunn
11/05/2022
You don't have to lock your money away to get an above-average return on your savings.

Interest on savings accounts are slowly improving following four consecutive Bank of England base rate rises, but they are still frustratingly low.

The best you can get on an instant access account is 1.5% from The Chase Saver Account – but you need to open a current account with the app-only challenger to get the deal. However, the good news is that you won’t need to shut your main or existing current account to be eligible.

This may be the best rate in years, but it’s still way below inflation, which currently stands at 7%, meaning money in all instant access accounts is losing value in real terms.

Earn 5% on your savings with Chase

There is a sneaky way Chase customers can earn 5% on their savings.

If you have a Chase current account, you can choose to round-up your debit card spending to the nearest £1, and Chase will autosave the difference for you.

For example, say you made a debit card purchase for £10.60; Chase will round it up to £11 and put the 40p in your round-up account. The round-up account pays 5% AER interest.

Chase will calculate your interest daily and pay it monthly. You can access and spend the money whenever you like – but if you leave it in the round-up account it will continue to earn 5% interest.

After a year, Chase will automatically transfer your round-up balance to your Chase current account, and you can start saving all over again.

Debit card round-ups are the only way to add money to the round-up account – you can’t move money to the account any other way.

This means the only way you can build a significant balance in the account is to use your Chase debit card for all your everyday card purchases. The bigger the amount rounded-up, the quicker you can increase your savings balance. For example, a debit card purchase of £1.01 will be rounded up to £2, with 99p transferred to the round-up account.

One way to increase the amount you transfer to the round-up account is to split transactions where possible. For example, if you wanted to buy two items costing £1.50 and £1.20, paying for these together would cost £2.70 and 30p would be transferred to your round-up account. But if you split these transactions, the first would result in a 50p round-up and the second 80p, meaning £1.30 would be moved to your round-up account.

Earn 5% on your savings with Cambridge Building Society

Another way to earn 5% interest on your savings is with Cambridge Building Society – but not many people will be eligible for the deal.

Cambridge’s Extra Reward Regular Saver pays 5% AER. Savers can pay up to £250 a month into the account which is fixed for a year. Someone paying in the maximum each month would save £3,000 in a year, earning £81.58 in interest which is calculated daily but paid on the maturity date.

But to open an Extra Reward Regular Saver you must have held a savings or mortgage account with The Cambridge for at least three years.

If you’ve held a savings or mortgage account with The Cambridge for 12 months you can open a Reward Regular Saver which pays 3% AER. You can only hold one regular saver with the building society at any one time.

Other regular saver accounts

First Direct’s Regular Saver pays 3.5% but you need to have a First Direct 1st Account to be eligible. Savers can save between £25 and £300 a month into the account.

NatWest and RBS both offer the Digital Regular Saver to their respective current account customers.

The account pays 3.3% interest on balances up to £1,000. Balances between £1,001 and £5,000 earn 0.3% interest. You can only pay up to £150 into the account each calendar month. However, you can set up debit card round-ups to be transferred to this account and they don’t count towards your monthly £150 limit – so it’s possible to stash away more than £150 a month.

Fixed rate bonds

The best rate on a one-year bond is 2.25% AER/gross from Flagstone, provided by BLME, according to Savings Champion data. However, you need a hefty £10,000 in savings. Alternatively, Oxbury offers a slightly lower 2.23% but the minimum deposit amount is £1,000.

However, until the end of today (11 May), Hargreaves Lansdown is offering a cashback incentive on its Active Savings Club, boosting a one-year deal to up to 2.4%. Via this cash savings platform, customers can open the Aldermore Bank’s 12 month fixed term savings rate of 2.2%. However, those depositing the minimum £10,000 will earn £20 cashback, essentially taking the rate to 2.4%. Those with £20,000 will receive £30 cashback, giving an effective rate of 2.35%.

Meanwhile those with £30,000 or £40,000 will receive £40 and £50 respectively, helping to push rates up to 2.30%. And for those with £80,000, the cashback offered by Hargreaves Lansdown is £100, leading to an effective interest rate of 2.33%.

If you’re happy to tie your money up for a few years, fixed rate bonds offer better interest rates than easy access savings accounts.

Shawbrook Bank and United Trust Bank are paying 2.80% on their five-year bonds, while PCF Bank, Hodge Bank and Secure Trust Bank all pay 2.75% on a £1,000 deposit, according to Savings Champion.

For the latest best deals on cash savings accounts, see YourMoney.com’s The savings accounts paying the most interest which is updated monthly.

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