When it comes to saving money, people naturally want to make their cash work for them. This means finding a suitable savings account with a decent interest rate. Some people stash their cash in a building society account, while others use a bank or specialist savings account such as a cash ISA. Let’s explore these financial institutions to determine which ones offer better interest rates.
It is essential that you do your research into savings accounts before you decide where you will put your money. You should never assume that a particular bank or building society will pay the highest rate, as there have been a lot of changes recently due to changes in the base rate from the Bank of England. While the base rate hikes have come as bad news for borrowers, they have benefitted many of those with savings accounts because of the higher interest rate they receive on their money.
As a saver, it is important to shop around. Whether you are looking for tax-free options, accessible savings accounts, a regular savings account, or a 30/90 day notice account, you will find various options from both banks and building societies.
One thing to keep in mind when deciding which savings accounts are right for you is that building societies do not have to pay dividends to shareholders. As a result, they often pay higher interest rates to savers than banks. Having said this, the interest rates paid by building societies and banks can vary, and some pass on rate increases more quickly than others. This is why thorough research is necessary if you are considering opening a new savings account but are still deciding which one to choose.
Many people struggle to decide whether you opt for building society savings accounts or a bank account. The interest rate paid will often be the deciding factor when making this type of choice. If your research shows you can get a better interest rate with your local building society than the local bank, you will naturally want to choose this option. Past studies in years gone by have shown that over a year, building societies have paid more interest to savers than banks, which is one of the major appeals for savers.
However, you also need to remember that building societies often have geographical restrictions, so if a particular building society pays out an impressive interest rate to savers, you can only benefit if you fall within the catchment area. Another thing that sometimes puts people off saving with building societies is their level of stability compared to banks. However, you should remember that if anything happens, you will most likely be covered by the Financial Services Compensation Scheme (FSCS).
Below, we will look at some of the main factors you should consider when deciding whether to open a building society savings account or a savings account with the bank.
As we already mentioned, the interest rate you receive will play a big part in deciding whether to save with a building society or bank. Some of the other factors you need to consider are:
One of the things you need to look at in addition to the rate of interest paid is the types of savings products offered. Both banks and building societies generally offer various savings accounts to cater to different needs and preferences. You need to look at the products that they offer so you can find ones that fit in with your specific needs.
Assess your requirements beforehand – for instance, how often you intend to withdraw, whether you want instant access or limited access, if you want variable rate or fixed rate options, and other key factors. This will make determining the account type best suited to your needs easier. With banks and building societies catering to a range of account holders, you should find one ideally suited to your needs.
Also, you should consider whether you need to give a certain amount of notice to avoid financial penalties and if a minimum account balance must be maintained. Whether you are a seasoned saver or a first-time saver, these factors will help you to choose the right product from the options available.
Another thing that you need to look into is your eligibility for the savings account you are interested in. While building societies often offer higher interest rates on savings accounts, they also tend to have stricter criteria – for instance, certain rates might only be available to existing customers, or you might need to live in a specific postcode area to open an account with them.
So when deciding on whether to go for a building society or bank with your hard-earned cash, make sure you first find out about the eligibility criteria and compare them to your individual circumstances to avoid wasting your time. You will often find information about eligibility in the FAQs on the building society or bank website, or you can simply contact them to find out.
With the wide range of savings accounts available these days, finding the right one can become a challenge. So, you need to consider the type of account you want and your savings goals. Consider your circumstances when it comes to finances so you can determine how much you want to put aside each month and put some thought into important factors, such as whether you wish to access your money easily or prefer access to be restricted.
Some people are keen to find a simple regular saver account where they can pay money into the account and withdraw whenever they like. These instant access accounts tend to come with lower rates of interest. If, on the other hand, if you can afford to leave your money where it is for a while, you can choose a higher-interest account. For instance, you will find options such as junior ISAs, one-year fixed-rate cash ISAs, fixed-rate bonds, and other accounts where you must leave your money where it is over a specified fixed term.
If you want to learn more about what you would earn on different savings accounts over a year, you should look at the AER (Annual Equivalent Rate). This makes it easier for you to make a more informed decision.
When choosing a savings account, it’s important to consider how easy it is to deposit and withdraw funds. Opting for an account with easy access can make managing your money more convenient. Some people want to make lump sum deposits as and when they can, while others want to put aside a specific amount every month.
Depending on whether you go with a building society or bank – and what sort of account you choose – eligible deposits might be payable via bank transfer, which makes it easy and quick to put money into savings. However, some might have more limited ways of making deposits, such as going into the branch or visiting a Post Office, so make sure you look into this before making your decision.
Building societies have generally been shown to offer higher interest rates than banks. However, as you can see from the points highlighted below, it is crucial to consider a range of other factors when deciding between savings accounts. You also need to ensure you save with a reputable financial institution – you can check the Financial Services Register with the Financial Conduct Authority (FCA), or the Prudential Regulation Authority (PRA) to ensure the bank or building society you are considering is authorized.
Make sure you conduct thorough research before committing and don’t focus on the interest rate alone. While the rate of interest paid is a very important consideration, you also need to make sure you choose the right product for your specific needs and one that matches your savings goals and withdrawal requirements. In addition, it is crucial to ensure you select the right provider for your savings account, which means finding a properly authorized bank or building society with a solid reputation in the industry.