Now that people are saving more money again many are shopping around for a savings account that gives better rates of return. It is possible to compare savings at moneysupermarket.com and choose an account that gives a good rate.
There are many banks that offer incentives to get new clients to sign up with them. Historically, savings accounts have not given a very good interest rate and it takes large amounts of savings to see an appreciable difference.
Some banks offer rates as high as 3% as an introductory special. It is important to read the fine print before anything is signed.
Often, these rates only last a short time before they are quietly dropped to much lower amounts. Someone signing up and depositing $1,000 is not likely to see a very large return during this promotional period.
If you make a deposit of $10,000, you can realize a nice gain for a time. Many people take advantage of these promotions and then switch over to a different bank when the period of high-interest is dropped.
This strategy works for many people but only if large amounts of money are involved. As always, it is important to find out if there are any charges involved in switching to a different account and if it makes financial sense to do so.
Savings accounts may have withdrawal or deposit limits. This is not the ideal scenario since it may sometimes be necessary to withdraw large amounts of cash.
It is never a good idea to let a bank restrict how much money you are allowed to deposit or withdraw. Some savings accounts fine you if you do not make a monthly deposit.
Savings accounts that require you to lock in your money for at least 12 months may close the account early or give an interest penalty.
Again, it is important to read the fine print to see what kind of penalties and charges will be incurred when a cash withdrawal has to be made.
It is ideal to have a totally unrestricted account but the interest rate on these may be very low. Another thing to take into consideration is the stability of the bank.
A few years ago this would not have been a topic, but because of the credit crunch many people now think about this aspect. Sometimes, it is better to go with large established banks that have a good financial record and plenty of cash flow.
There are so many smaller banks that it is not always easy to know which ones are in a sound fiscal position. Some people use their savings accounts to save money for retirement.
They feel this is a safer prospect than investing their money in mutual funds and other savings vehicles that are deemed riskier.
Due diligence is always important and consulting with a financial adviser may be a good idea if the account is to have large amounts of money in it.