Bonus rates give savers more bang for their buck

Savers are benefiting from the number of easy access savings accounts that are paying bonuses to inflate the headline rates, according to research from moneysupermarket.com.

The current low rate environment prevents banks and building societies from offering attractive savings deals and many are getting around this by offering short-term bonus rates, typically for 12 months. The average bonus rate is currently at 1.66 per cent, and nine out of the top ten easy access accounts currently carry a bonus. Savers who take advantage of an account with a bonus should check when the bonus expires and set themselves a reminder to check their account, as rates are likely to plunge significantly after the bonus period.

The best easy access savings account is currently the West Bromwich BS Direct Bonus Account 2, offering a rate of 2.9 per cent, which includes a bonus of one per cent on balances over £1,000. For those looking for the highest rate on deposits of less than £1,000 the AA Internet Extra (Issue 3) account with a rate of 2.8 per cent, including a bonus of 2.3 per cent, is the best option.

The variation in bonus rates is significant with bonuses ranging from 0.69 percent up to 2.31 per cent. While they offer customers a big incentive to save there is still the need for savers to be mindful of the bonus expiry date as once it is removed the interest paid on the account will be greatly reduced.

Kevin Mountford, head of banking at moneysupermarket.com, said; "At a time when so many accounts are offering low rates, bonuses are a great way for savers to get returns well above the 0.5 per cent base rate.

"Banks are looking for creative ways to encourage savers through their doors, and therefore use bonus rates to bump up the headline rate of the account. Savers should take full advantage of this approach but they need to be on the ball to make sure they are ready to switch once the bonus period comes to an end, otherwise you will be left on much lower interest rates.

"A really savvy saver could spend a long time benefiting from savings bonuses as long as they are willing to put a little effort in, usually every 12 months when rates expire.

However some bonus rates are not fixed and savers should keep an eye on their accounts in case their provider decreases the bonus rate at short notice."