New research from the BSA found the nation’s biggest savings goal is to build a rainy day pot, with a third of people putting money aside to cover unexpected costs.
With savings rates starting to fall you may be keen to open a high-interest deal, but make sure you read the small print. Caveats in the terms and conditions can impact everything from withdrawal allowances to how interest is paid So it's important to take your time to understand what you're signing up for.
Here, Which? has taken a closer look at the finer details all savers should be checking before opening an account.
4 small print pitfalls to avoid
When deciding which type of savings account to open, ask yourself two things: how likely are you to need access to your money, and how long are you prepared to lock it away?
Then the next step should always be to scrutinise the policy details. Failing to do so could mean you end up taking a hit if your circumstances change or missing out on potentially higher returns.
To help you avoid making a costly mistake when opening a new savings account, here are four of the most common catches that are often buried in the small print.
1. Not so easy access
But some top-rate products may limit the number of withdrawals you can make or the balance you must maintain each year without losing interest.
Which? analysis of Moneyfacts data found half of the current top 10 market-leading instant-access accounts limit the number of withdrawals you can make or the balance you must maintain before imposing penalties.
2. Some rates can be deceptive
In a market of falling savings rates, it's easy to be wooed into opening an account with the highest interest deal. However, the rate offered on some accounts may yield smaller returns than expected or drop dramatically after a certain period.
But these accounts come with a limit on how much you can save each month, which means you'll only earn interest on relatively small sums of money for most of the term. So you will find you don't earn as much as the headline rate suggests you will.
You should also watch out for any offers of introductory 'bonus' interest rates on easy-access accounts. These might be fixed for 12 months, but when that period expires, the rate payable on your cash may drop.
For example, the Sainsbury's Bank Bonus Websaver offers a competitive, above-average fixed interest rate of 4% AER for the first 12 months. But that plummets to just 2% after the first year is up.
Find out more:3. Monthly interest payment options
Some accounts offer to pay interest monthly, rather than annually and when you come to open the account you'll usually be given the choice between having the interest paid either into your nominated current account or added to existing funds in your nest egg.
If you choose the former, you won't benefit from compounding (when the interest that's paid into your pot accrues interest on itself over time, meaning your savings grow quicker) and will mean you earn a slightly lower gross rate.
4. What happens after a fix matures
When you open a fixed-rate savings account, double-check the terms and conditions. The small print will usually explain what happens once the term ends or 'matures', including ways to withdraw the money or reinvest it. Even if you missed these details when you initially took out the account, the bank should get in touch directly to discuss your options before maturity.
If you don't let the bank know what you want to do next - either because you missed the emails or forgot to reply - the provider will usually move the lump sum into a different account, such as an instant-access deal. While this makes withdrawing your money easier, these types of accounts tend to pay considerably less interest than fixed-rate deals.
In other cases, the funds will be transferred into a savings account of the same length as the one that matured. It means your money will be locked away for another long period and you may not be able to switch to a higher rate elsewhere.
Many banks, however, will simply pay the money back into the current account you transferred the cash from in the first place. The trouble is that if you don't reinvest the money after it lands back in your account, it's likely you'll be earning little or no interest at all on your lump sum.
Find out more: undefinedsource https://www.which.co.uk/news/article/4-common-catches-hidden-in-savings-account-small-print-a6wjj2S72Itx