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Savings accounts

A Savings Account comes in many different guises, but is normally run alongside other services at the same financial institution, such as Current, Loan and Mortgage products. A Savings Account can be an extremely emotive issue, considering the poor rate of interest that is commonly applied to it. However, it is considered safer to operate a Savings Account than to make speculative investments on the Stock Market, although equally the rewards are often considerably less.

There are two main types of Savings Account. The first is often referred to as Instant Access. The main advantage of this product is that customers can withdraw capital sums from their outstanding balance with no penalty as often as they like. Although the interest rate will reflect this kind of flexibility.

The other type of product normally offered is where customers have to give notice to withdraw their funds. The length of notice will vary, but 30, 60 and 90 days are all common. The longer the notice period the more likely a higher rate of interest will be paid. Customers need to be aware that immediate withdrawals are often allowed from these kinds of products, but that a fee is normally applicable for breaking their terms and conditions. This will often be a minimum flat fee rising to a percentage of the amount withdrawn, whichever is the higher.

Children are often more used to this kind of banking product as they use it to build up funds. Building Societies have issued passbooks for customers to keep track of their deposits for many years, while banks issue statements in the normal fashion. More recently customers have been allowed to link surplus funds in these products with their mortgage. Instead of accruing interest on the capital sums, the balance is used to offset the mortgage and so reduce the interest payments the customer has to make. Of course this means that no interest payments are made to the existing balance, but this can often prove more cost-effective for a customer with a large outstanding housing debt.




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