Savers thinking of investing in regular savings accounts offering high rates of interest should carefully evaluate what they will actually earn and the conditions of the offer, says Defaqto. The majority of the highest paying regular savings accounts have conditions attached to their availability. Typically they are restricted to customers who either have a specific current account with the bank or to new customers prepared to open such an account. Depositing a certain amount of money into the current account each month may also be one of the conditions that applies before the high paying regular savings account can be opened.
David Black, Principal Consultant - Banking at Defaqto said: “Some of these offers have cracking headline rates but all of them are limited to a one year period so the actual amount of interest that can be earned looks surprisingly low when compared to the headline rate”
“Many people wrongly assume that if they invest £100 a month for a year at 10% that they’ll get gross interest of £120 (i.e. 10% on the entire £1,200). In reality only the initial monthly investment that will earn interest for a full year. The actual interest earned would only be £65 for a non-taxpayer, £52 for a basic rate taxpayer or £39 for a higher rate taxpayer”
