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The drawbacks of easy-access accounts: Do you know the full terms?

The drawbacks of easy-access accounts: Do you know the full terms?
Paloma Kubiak
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Paloma Kubiak

Easy-access savings accounts sound simple enough, but many could leave you confused over the interest rate you’ll receive.

When it comes to interest, a greater number (45%) choose to receive it monthly, while 41% opt to collect it annually.

However, one in seven savers said they don’t know how they receive interest on their savings. See’s Confused over monthly or annual savings interest? Here’s what you need to know.

According to research from Investec, four in 10 savers who receive interest on a monthly basis say this is important when paying bills. For one in five of the 1,028 polled, it’s “extremely important” when it comes to meeting bill payments.

For two out of three people receiving monthly interest on their savings, they say they’ve always opted in to this frequency. But for one in five, they only started doing so during the Covid pandemic or since the onset of the cost-of-living crisis.

Given the importance of this extra cash, analysis by Andrew Hagger of Moneycomms for Investec revealed that just one in three (15 out of top 50) instant-access accounts offer monthly interest on deposits with no restrictions or bonuses.

A further six accounts offer monthly interest but limit withdrawals, while three rely on bonuses to boost the rate they pay. The other 26 accounts in the top 50 only offer annual interest.

Indeed, Savings Champion data revealed that the current top payer (Ulster Bank) offers 5.2% AER on a minimum £5,000 for current account holders, but the rate drops to 2.25% if you go below this sum. Interest is also paid annually.

Meanwhile, digital challenger Chase pays 5.1% AER, which is a boosted rate (1%) until January 2025, while Flagstone’s Instant Access (provided by SmartSave) pays 5.07% AER on a minimum £10,000 deposit. Here, interest is calculated and paid daily.

Account options are ‘confusing’

David Hunt, head of retail savings at Investec, said: “Receiving monthly interest on cash savings is clearly very important to millions of savers when paying their bills, so it is crucial that people look for a mix of accounts that enable them to manage their money in the way they want.

“Instant-access accounts offer flexibility, while fixed rate accounts generally offer higher rates but restrict access for a set period and mainly pay interest annually. Notice accounts can also offer higher rates while restricting access, but will often pay monthly interest.

“Our research shows however that too many instant-access accounts either do not offer the option of monthly interest, place restrictions on withdrawals or rely on bonuses to boost headline rates, which can make it confusing for savers looking for the best account for their circumstances.”

Related: Savings market ‘holding its breath’: Top-paying accounts right now