Don’t be caught out by withdrawal fees

Rachel Thrussell Head of Savings at moneyfacts.co.uk comments: “Once the dust has settled from the November base rate increase, it will be a great time to shop around for a new savings account. But don’t be caught out by complex terms and conditions.

“Today’s savings market is littered with accounts that have bonuses and a whole array of withdrawal restrictions, ranging from loss of interest, tiered interest to a limited number of free withdrawals.

“These restrictions may not necessarily be a bad thing, as long as the consumer fully understands the hoops they need to jump through to receive a competitive rate in return. The problems arise when these accounts are promoted as instant access or no notice, and if the consumer is not made fully aware of the terms, they could be in for a nasty surprise when asked to give notice or lose interest. They could receive a lower rate of return or asked to pay to withdraw.

“The latter is not as commonplace as losing interest, but there are five well-known institutions which charge a fee to withdraw from a instant access account.

“Take care to understand your account, especially in the examples above. Being charged for a withdrawal could easily wipe out much of the interest earned, and possibly eat into your savings too.

“The competitive nature of the savings market has forced providers to become increasingly creative with their product designs, and in some instances has forced rates upwards. However, as with everything in life, if it seems too good to be true, then it probably is. Take the time to look into the full terms and make sure your spending and savings habits match the account you choose. There are some great rates out there, but don’t sign up unless you are aware and happy with the associated terms and conditions.”