Beware the temporary bonus

As providers compete for saver's cash, more and more tempting bonuses are being added to easy access accounts to create temporary table topping rates.

Kevin Mountford, head of savings at moneysupermarket.com, said: "Many easy access accounts are boasting artificially high rates due to introductory bonuses. These are designed to lure savers in with the hope they stay loyal to the account after the bonus runs out".

"NatWest's e-Savings account has the biggest fall for savers after 12 months with a drop from 6.5 per cent to 4.3 per cent. This time last year, there were no 'bonuses' over 1.2 per cent, now there are five, including NatWest's at 2.2 per cent AER.

"In the current economic climate there is a real battle to maintain attractive headline rates, but many providers are also looking to ensure their profits aren't eroded by providing high rates for too long".

"While the use of a bonus in itself isn't a problem, it does mean savers need to be more disciplined and ensure they check their rate once the bonus drops off".

"With inflation running at 5.2 per cent, basic rate taxpayers need to be earning 6.5 per cent just to break even."