Barclays has launched a new instant-access savings account, offering a market-leading rate of up to 5.12% AER. But it comes with some tricky terms.
The Rainy Day Saver account is only available to Barclays current account holders who are signed up to its Blue Rewards scheme. Plus, the top rate of 5.12% AER only applies to balances of up to £5,000; anything over this earns 0.15% AER.
Barclays isn’t the only savings provider to up its interest rates recently. Following several base rate rises, savers' deposits offer a cheaper source of bank lending than the Bank of England, so many providers are looking to entice new savers with higher rates.
Here, Which? looks at what the Barclays Rainy Day Saver offers, and how it compares to other top-rate saving accounts.
Who can get the Barclays Rainy Day Saver?
As we mentioned, you'll need to be a Barclays current account customer and also signed up to Blue Rewards in order to access the Rainy Day Saver account.
Barclays Blue Rewards is an optional current account add-on, which costs £5 a month. However, you can cancel out this fee if you pay out two or more direct debits from the account, and up to £9 plus cashback for holding other Barclays financial products, such as a mortgage, home insurance and life insurance.
You'll also get access to two savings accounts: the Blue Rewards Saver, which pays 1.26% AER in any months where you don't make any withdrawals, and the new Rainy Day Saver.
You need to pay in at least £800 a month to stay eligible for these rewards.
As the Rainy Day Saver can be opened from just £1, it may suit those who have a smaller amount to save. If you have a larger savings pot, it's still not worth saving any more than £5,000 in this account, as you can easily beat the 0.15% paid on larger balances elsewhere.
If you save £5,000 for a year (assuming the interest rate doesn't change and you don't make any withdrawals) you'll earn just over £250 in interest. It's up to you to weigh up whether this is worth making sure you fulfil the other Blue Rewards criteria, particularly if the rewards you make don't outweigh the £5 monthly fee.
What are the best savings rates?
This table shows the top rates for restriction-free fixed-term and instant-access savings accounts, ordered by term.
| Account type | Account | AER | Terms |
|---|---|---|---|
| Five-year fixed-term savings account | Zopa 5 Year Fixed Term Savings | 4.56% AER | £1,000 minimum deposit |
| Four-year fixed-term savings account | United Trust Bank UTB 4 Year Bond | 4.45% AER | £5,000 minimum deposit |
| Three-year fixed-term savings account | Nationwide Building Society 3 Year Fixed Rate Online Bond | 4.75% AER | £1 minimum deposit |
| Two-year fixed-term savings account | Charter Savings Bank Fixed Rate Bond | 4.61% AER | £5,000 minimum deposit |
| One-year fixed-term savings account | Charter Savings Bank Fixed Rate Bond | 4.31% AER | £5,000 minimum deposit |
| Instant-access savings account | Al Rayan Bank Everyday Saver | 2.35% EPR* | £5,000 minimum deposit |
Source: Moneyfacts. Correct as of 7 October 2022, but rates are subject to change. *Accounts from Al Rayan Bank are Sharia-compliant, and so pay an expected profit rate (EPR) as opposed to an annual equivalent rate (AER).
As you can see, the Barclays Rainy Day Saver offers a far higher rate of interest than even the top-rate five-year fixed-term account. But it's important to note that these accounts will pay a higher rate on much larger balances.
These accounts are also restriction-free, meaning you don't have to be tied to a particular current account to access them. However, many of them do require far higher minimum initial deposits; only only can be opened with £1, and the majority require at least £5,000.
- Find out more: how to find the best savings account
Will savings rates continue to rise?
When we analysed savings rates on 13 September ahead of the monthly inflation figures on 14 September, the top rates were around 1% lower than they are today.
These rises are largely tied to increases to the Bank of England base rate, which is now 2.5% – the highest it's been since December 2008. Experts predict it could rise further as the Bank continues to battle soaring inflation and deal with the aftermath of the government’s mini-budget, which saw the pound plummet to historic lows. One estimate suggests rates could reach 6% next year.
So what does this mean for savings? While it isn’t always the case that interest on savings will rise in line with the base rate, there's no indication that savings interest rates are going to stop rising any time soon.
This puts savers in a tricky situation. Despite rising rates, no accounts can currently match or beat the current rate of inflation, which means everyone's cash is losing value in real terms (ie it can't buy as much as it once could). However, in order to secure the highest rates, you'd need to commit to a long-term fixed-rate account – potentially missing out on future rate increases.
The Barclays Rainy Day account presents one option. But there are a some others to consider:
The 'split and save' strategy
One alternative for savers who want to save their money at fixed interest while benefiting from rising rates is what we've nicknamed the ‘split and save’ strategy. This involves spreading your savings between several fixed-term accounts that mature at different times.
For example, a sum of £10,000 could be divided into five chunks of £2,000 and invested into one, two, three, four and five-year fixed-term savings account. After 12 months, the money saved in the one-year account would mature, at which point you can then move it into a five-year fixed-term account. The next year, you can do the same with the two-year account. Eventually you'll have five five-year fixed-term accounts on the go, each maturing every year.
This means some of your money can benefit if rates continue to rise in future years, and also means you can access part of your savings when it matures, if you need to – rather than having to pay any early-access penalties.
- Find out more: best savings accounts to open with £1 or more
High-interest current accounts
It's also possible to help your money grow by using a current account that offers high interest rates.
Nationwide, for example, currently offers the highest interest rate for its FlexDirect current account holders. It pays 5% AER on balances up to £1,500 in the first year (0.25% after that). It requires a minimum of £1,000 to be paid in each month – you could fulfil this by getting your wages paid into this account if you earn at least £12,000 per year after tax and other deductions.
Elsewhere, the Virgin Money M Plus current account doesn't have any restrictions on how much needs to be paid in each month, and it offers 2.02% AER interest on balances up to £1,000.
- Find out more: Best high-interest bank accounts
source https://www.which.co.uk/news/article/new-barclays-instant-access-savings-account-tops-5-interest-but-it-comes-with-caveats-a1A627u115jc