Easy Access Accounts
Easy access accounts are designed precisely how they sound: they are bank accounts which allow easy access to the funds in the accounts. The primary appeal of easy access accounts is the flexibility they provide savers, allowing the saver to dip into their savings when required.
The accounts have to be opened with a certain amount of cash deposited, the exact amount needed depends on the provider. After this point you are allowed to deposit or remove whatever you want as often as you will like.
Some accounts also allow you to choose to opt for annual or monthly interest on your savings. Some accounts also provided bonuses to the interest rate over a short time period. For example a base 1.5% interest with a 1% bonus for 6 months means that your account will receive 2.5% interest over 6 months then 1.5% afterwards.
Make sure you are aware of the bonus rate and normal interest rate and are happy with both. 4% interest might seem great but if it only lasts for 3 months then reverts to a 0.5% interest rate you may be losing money in the long term.
These kind of accounts are a headache for banks or providers as there is no way they can be sure that your money will still be with them in the future. Unlike cash locked into a junior ISA for 12 years your money is ‘unreliable’ and as such providers make less returns from investing your money. As a result easy access accounts are paid notably less interest when compared with more restrictive accounts.
These reduced interest rates rarely even match inflation, which is an issue for long term savers as it essentially means you lose money long term. On top of this some providers charge you every time you remove money, others more subtly do not pay interest for that month if you remove cash. It is therefore important you find out the exact arrangement with your provider so there are no nasty surprises 3 months down the line.
Easy access accounts trade off flexibility for interest rate returns. As such they are generally not suitable for the longer term saver, as the rates are not high enough to stave of inflation and the account could actually cost you money through charges. As such these kinds of accounts are suitable for individuals who are likely to need to dip into savings regularly and are unable or unwilling to have a separate savings account.