To give notice or not to give notice? That is the question that many savers must ask themselves. Notice accounts prevent hasty, spur-of-the-moment spending but in an emergency you simply can’t get immediate access to your money.
Here at Moneymagpie, we’ve put together a quick guide to notice and no-notice accounts. Give it a quick glance so you can be sure which sort of savings account is right for you.
What are they?
No-notice accounts are essentially semi-flexible, instant-access savings accounts. However, banks use different methods to make it harder for you to make withdrawals from no-notice accounts.
Others set a maximum amount of penalty-free withdrawals per year, limiting the amount of times you can take out money without sacrificing interest.
And many banks set minimum balances for no-notice accounts – so if you don’t have this minimum amount in the account at all times, you may lose the interest you’ve earned.
These terms and conditions mean that in practice, most no-notice accounts are somewhere between instant access accounts and bonds.
What are the rates offered?
The interest rates on offer are sometimes slightly higher than those offered for instant-access accounts. However, the fact that you can only get money out a few times a year means no-notice accounts are much more restrictive.
Who are they for?
No-notice accounts are available to just about anyone. Some will only be open to people over 16, but not all have age restrictions. And the initial deposits can be as low as £1, so you don’t need lots of cash to open one up.
No-notice accounts tend to function only by post. This means that you have to apply and conduct transactions manually, not electronically. Internet banking is rarely offered.
Things to watch out for
- Bonus rates
One thing to keep an eye out for when choosing a no-notice account is any bonus rate. This is an extra bit of interest (say 0.5% AER) that has been added on to the normal rate for a set period of time.
These rates often serve to push accounts to the top of the comparison tables. However, once the bonus rate ends, your rate is likely to drop well below those offered by the competition.
So, by all means get the account while the bonus rate is still going. But be sure to keep track of when the rate ends and change to another account with a more competitive rate when it does.
- Withdrawal penalties
Some accounts masquerade as no-notice accounts when they’re actually closer to being regular savings accounts.
These accounts boast instant access, which technically you do have – if you need to make a withdrawal you can. However, for any month that you make a withdrawal, your interest rate will fall from its normal rate to a meagre 0.1% AER.
This means that although these accounts appear to be instant access, they’re designed to make people keep their savings in the bank until the end of the account term. Sneaky!
What are they?
Notice accounts let you save little bits here and there, as well as big lump sums. However, you have to give notice before you make any withdrawals, otherwise you’ll be penalised (often with a loss of interest).
The amount of notice you have to give depends on the particular account you have. It usually ranges from a couple of days to three months.
How do you give notice?
Most notice accounts are controlled by post, so you have to send a letter to your bank informing them of your intention to withdraw the money. Your notice period will then start from the date the bank receives this letter.
Who are they for?
Notice accounts are great if you want to stop yourself spending your money on things you don’t really need. Having to give notice – or sacrifice your interest rate – means you’ll probably think twice before making any hasty withdrawals.
And, unlike a bond, if there’s a real emergency you can take your interest rate cut and get your hands on the cash relatively quickly.
If you have the self-discipline to leave your money alone, notice accounts may not be for you. Instant-access or no-notice accounts offer equally competitive interest rates, without the faffing around with notice periods.
However, if you need to protect your money from yourself, a notice account is a good option.
Things to watch out for
- With a notice account, make sure you understand the exact length of your notice period.
This may sound silly, but does a 60-day notice period mean 60 days or 60 working days? It’s always worth going over the terms and conditions carefully before you set up an account.
- You also need to be clear what the penalty for early withdrawal is.
Often you’ll lose the amount of interest you would have earned during the notice period. So, if your notice period is 30 days, your bank will subtract the sum of 30 days’ interest from the amount you’re withdrawing from your account.
For example, if you’re withdrawing £1,000, it would be 30 days’ interest on £1,000 that would be subtracted from your account.
For some accounts, the penalty for early withdrawal is even more than this amount. It’s essential that you know exactly what penalties you could face for early withdrawal.
Here’s our round-up of the best rates on the market:
Virgin Money Fixed-rate Cash ISA Issue 42 account is a 120-day notice account paying 2.4% interest. Minimum deposit is £1. Withdrawals allowed and subject to 120 days’ notice.
Principality Building Society Promise Saver Issue 4 is offering 1.1% AER. You can enjoy an annual bonus if you don’t make more than two withdrawals per calendar year. Minimum investment is £500, and to make withdrawals you must give 30 days’ notice by post. You can choose monthly or yearly interest.
No notice accounts
The Smile No-notice account pays 0.25% AER (variable) if you also hold a current account with them. Interest is paid annually and the minimum deposit is £1. You can access your savings without notice or penalty.