Don’t want to lock your cash away with Christmas coming up? Here’s the Moneymagpie guide to online savings and instant access savings accounts. Find the right account for your needs at the best rate with our comprehensive guide.

• Learn the difference between online savers and instant access savings accounts
• See who is offering the best rates
• Want to skip the best buys and go straight to the info? Click here
• Here are some questions to ask yourself before taking out an account

Grab the best rates:

• AER: 3.10% (but only for new customers for 1 year. After 12 months, reverts to standard variable interest rate, which currently stands at 0.50%)
• Interest paid: Monthly
• Minimum balance: £1
• Access: Online and telephone

Sainsbury’s Easy Access Saver

• AER: 2.6% (After 12 months, you’ll revert to the standard variable interest rate, which currently stands at 0.50%)
• Interest paid: Monthly/Annually
• Minimum balance: £1
• Access: Online and telephone. If you make 6 or more withdrawals during the 12 month period your interest will go down to 0.50%.

What’s the difference?

An online savings account is a savings account that can only be dealt with via the World Wide Web, and is sometimes described as an easy access account (although don’t confuse that with instant access).

You have all the features of an ordinary savings account – such as checking your balance and transferring money etc – but you don’t have the option of going into the branch to withdraw real cash. Generally, you can deposit and withdraw as much as you like, whenever you want, but bear in mind you may lose your interest if you withdraw money. For example, some accounts take away all the interest you would have made for the whole month in which you withdraw the money.

There are regular online savers too, which require regular monthly payments – so it’s important to check the terms of whichever account you open. Online savers are useful if you do all your banking online anyway. That way it’s easy to keep track of all your accounts. In addition, because the bank or building society doesn’t have the added costs of manning the phones and staffing their branches with more workers, they can sometimes offer you a better rate than other types of account with similar terms and conditions.

An online savings account can’t be ‘instant access’, because although you can access your money at any time online, you will have to transfer it to a separate account to withdraw it. This could take a few days depending on the circumstances.

There are three types of online savings accounts:

No notice online savings accounts: these generally don’t require any notice for you to transfer money from the account (remember, it’s online, so you can’t withdraw cash from a branch), and shouldn’t penalise you through loss of interest if you do. Do check the small print when you apply however, because there may be a catch somewhere.

Notice online savings accounts: these often penalise you if you withdraw money from the account without giving them a set amount of notice (which will be stipulated in the terms). With this type of account, there’s a possibility of your losing your interest if you don’t give them sufficient notice.  Be careful with these accounts – the whole ‘notice period and loss of interest’ aspect of things is often only mentioned in the small print.

Monthly interest online savings accounts: these can either be notice or no notice, and simply means you receive your interest monthly, rather than annually, or after a given amount of time.

What is an instant access savings account?

An instant access savings account is the most flexible type of account. You can deposit and withdraw money as the mood takes you.

Savings accounts advertised as ‘instant access’ may still incur a penalty such as loss of interest for the month you withdraw the money in. But many don’t, so you’ll need to check this.

All instant access savings accounts should offer a cash withdrawal facility, either in branch or with a cash card.
Most also offer an online banking service, along with a phone number to call – but this will depend on the package offered by individual institutions.

Which type of account is right for me?

The only real difference between online savers and instant access savings accounts is the way you access them.
As with any other financial product, the right account for you will depend on your individual circumstances, and you’ll need to check the small print on any account you’re thinking of applying for.

Unless for some reason you’re desperate to be able to withdraw cash or you’re a complete technophobe, it’s probably a good idea to go for an online savings account.

This is purely because online savers often (though not always) offer the best rates. With the internet pretty much taking over all things consumer-based, there is also a much better selection of accounts on offer. Finally, they’re very easy to manage at any time of the day or night.

If you’re searching comparison sites (like Moneymagpie’s best buy tables), both types of accounts will be grouped together under a title like ‘easy access accounts’ – because they’re so similar.

Things to check in the terms and conditions

• Are you getting a competitive rate, compared to other accounts with similar terms?
• How often is the interest paid? If you’re looking to make an extra income from your savings, an account that pays interest monthly will be more beneficial.
• Is the rate advertised a ‘bonus rate’? If so, you may lose that good rate after a certain amount of time and need to switch accounts again.
• Is there a notice period for withdrawals? If so, what is it?
• Is there an account opening restriction? You may have to hold a current account with the bank or building society before you can open a savings account.
• Is there a minimum opening balance? Some accounts require a minimum initial deposit, which could be anything from £1 upwards.
• Are there any withdrawal penalties? A lot of accounts will not pay out interest if you make a withdrawal. Always check the conditions for this.
• Does the account offer any bonuses? You may be offered a higher interest rate if you hold a current account with the bank, or if you don’t make any withdrawals in a certain period of time.
• How can you access the account? By post, in branch, over the phone or via the internet?

Useful Links

• Saga’s Internet Saver account
• ING Direct Savings account
• Sainsbury’s Easy Access Saver