Notice savings accounts
Want to earn a better rate of interest but don’t want to lock your money away for years? A notice savings account might be the answer. Like the name says, you have to give notice to take money out, but you might earn more on your savings. Here’s how notice savings accounts work.
Want to earn a better rate of interest but don’t want to lock your money away for years? A notice savings account might be the answer. Like the name says, you have to give notice to take money out, but you might earn more on your savings. Here’s how notice savings accounts work.
What is a notice savings account?
A notice account is the middle ground between an instant access and fixed-rate savings account. This means you don’t have to lock your money away for a set time, but you do have to give your provider advance warning every time you want to take some out. The idea behind a notice account is that you get a higher rate of interest than with a standard instant access account.
So how much notice do you have to give? UK savings accounts offer notice periods ranging from 30 to 120 days, but those timescales can be longer or shorter than that, depending on your provider. As well as giving notice, you’ll also need to tell the provider how much money you want to withdraw. And some notice accounts restrict the number of withdrawals you can make in a year.
How do you give notice?
You can do it online, over the phone or in writing, but it varies between providers. You’ll need to tell your savings provider the:
- number of the account you want to withdraw from
- amount you want to withdraw
You can only make one withdrawal each time you give notice, even if you take out less than you’d specified. You’ll get a penalty if you take out more.
Why choose a notice savings account?
They’re reasonably flexible: with a bit of forethought you can make deposits and withdrawals at a time that suits you, rather than locking your money away in a fixed rate savings account. They can be particularly useful if you’re saving for something specific like a wedding or house deposit, and you’re not exactly sure when you’ll need to get your hands on your money.
Also, notice accounts can help people who use savings accounts to limit their spending. They put an obstacle between you and your money, so you’ll be less tempted to withdraw it and spend it on impulse buys.
Who shouldn’t use a notice savings account?
If you’ve got a lump sum you can lock away for a while, a fixed-rate savings account could be a better option for you as it will usually give you a higher interest rate.
Limited access savings accounts are also not suitable for you if you need to get hold of your money quickly. And they’re definitely not the place to keep your emergency rainy day fund for those moments in life when you need to access your savings unexpectedly.
Financial advisers recommend having enough accessible savings to cover at least three months’ worth of your outgoings, so make sure you’ve got this first before even considering a notice account.
If you do have to make an emergency withdrawal from a notice account, you’ll usually lose some interest on your savings.
Best notice savings accounts
If you’ve decided you want to open a notice savings account, how do you find the right one for you? Here are a few things to look for:
- Interest rates: Don’t assume that a longer notice period will automatically give you higher returns. It’s rare, but you might find that a 30-day notice account pays more than a 90-day notice account.
- Bonus offer: Many savings account providers will try to entice you in by offering a bonus period where they pay a higher rate of interest. But once the introductory period ends, that rate could drop.
- Minimum initial deposit: Some notice accounts can be opened with as little as £1. Others will require a minimum deposit of at least £1,000 to qualify.
- Managing the account: Not all notice accounts can be managed online. Some are operated in branch or by post only, so make sure you’re clear on how you put in and take out your money before you sign up.
How to compare savings accounts
In theory, notice accounts offer higher interest rates than instant access accounts, but this isn’t always the case. Before opening a notice account, it’s worth comparing the rates available for other types of account, first. You might find that an instant access account gives you better returns – and won’t require you to give any notice at all.
Notice accounts usually have variable interest rates. This means the interest rate can change over time. If you find you’re no longer getting a competitive deal, shop around to see if you can get a better rate somewhere else.
