Fixed Rate Saving: 3 Top Tips for Choosing Your Bond



Watch Your Savings Grow with a Fixed Rate Savings Account

If you have saved or inherited a large sum of money which you have no intention of spending in the foreseeable future, you could benefit greatly from opening one of the many fixed rate savings accounts (or FRSAs) that are available from high street banks. Such accounts offer far higher interest on your money than regular bank accounts do, in exchange for your commitment of not withdrawing any funds from said accounts for a fixed period (for example, one, two or five years).

But with so many FRSAs on offer, how does a person make sure that they choose the very best available to them?  Read on to find out…

TIP #1: Consider Your Saving Habits



Have you been rather useless at saving money in the past? Have you deposited a percentage of your wages into a freely accessible savings account each month, only to withdraw and spend such on a pair of shoes, or filling up your car’s tank a matter of days later? If so then a fixed rate savings bond probably isn’t the right option for you, since many fixed bonds include a clause explaining that charges will be incurred for the early withdrawal of funds from the account and/or the level of applicable interest will drop as a result.

Many FRSAs do not allow extra deposits to be made either, in order to prevent the special, often limited-edition interest rate offered being applied to additional funds.  There are some FRSAs meanwhile that do allow extra deposits to be made but whether or not the interest rate will be applicable to these funds will be dependent on the terms of the chosen account.

Fixed rate savings accounts really are most ideal for those individuals who can afford to have their access to a significant sum of money cut for an agreed period because they readily have access to other funds. For example, an employed individual might wish to lock away and grow £10,000 worth of inheritance money because their job already provides them with enough income to live on, and they haven’t yet decided how their windfall should be wisely spent.

Anyone seeking their ideal fixed rate bond should also check the monetary amount required to open each available fixed rate account. This required deposit can be a little as £1 (generally speaking, accounts with low opening deposits do accept additional deposits) but more than £10,000 for certain premium options.

TIP #2: Shop Around for the Best Interest Rates




If you happened to mention to an advisor at your current bank that you are interested in opening a FRSA, you can safely bet that he or she would instantly start recommending the different options offered by the branch! You might be tempted to simply go along with the recommendation/s given to you by said advisor, since you have been banking with your current bank for several years and feel that they are reliable. You should however, be sure to “shop around” for the best deal and investigate the rates offered by those banks you have never before been a customer of. This will ensure the best possible return on your investment.

Many high street banks now also offer online-only fixed rate savings accounts which comprise exclusive interest rates which will not be found within their bricks-and-mortar stores. This means that you should also browse the World Wide Web thoroughly to find the very best deals. Using several of the many (free) price comparison websites out there can also help you in your quest to locate your ideal account.

It is also important to consider incentives that might be offered on certain FRSAs. On the surface, an account offering a 5% interest rate might seem more beneficial than another that offers 4% but this is not necessarily so. Some branches might offer a bonus payout in the wake of no withdrawals made, account renewals, or successfully leaving the balance alone for a pre-determined number of years.

TIP #5: Carefully Read the Terms of Your Bond



You would think that “fixed rate” would mean exactly that – and it should – but it is always important to check the terms and conditions of your FRSA contract. A well-known bank recently landed itself in a spot of trouble after it was discovered that they had included a clause within one of their FRSA agreements which would allow them to adjust the given interest rate at their discretion, in line with the health of the economy.

Any customers who signed such agreements were arguably also in the wrong, since these people scrawled on the dotted line to declare that they fully understood all of the included T&Cs. Financial industry legislation is being tightened to prevent banks from including such sneaky conditions in the future and so you should never face such issues. Never run the risk though; ensure you read anything you plan to sign your name on thoroughly.

If you are ever in doubt over – or do not understand – any clause included in your contract, be sure to ask a legal expert to read through it on your behalf.

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