Many savings accounts offer bonus rates also known as bonus interest to entice customers to save more money and make fewer withdrawals. The features of bonus rates are:
- In the form of an annualised interest rate
- Are usually awarded on top of a base interest rate.
There are two main forms of bonus rate accounts, which suit different types of savers:
- Some are offered for a limited period of time, often around four months
- Others come with conditions or restrictions, such as maximum of one withdrawal in a calendar month.
The former are popular with savers who do not want to be penalised for taking money out during the month. One way to use these accounts is to deposit a large amount after pay day each month to maximise the balance on which interest is calculated, then only withdraw money as needed throughout the month. Due to the time restrictions, it is essential to regularly compare savings accounts to stay on a hot deal.
The latter are popular with savers who are working towards a goal and can benefit from an incentive to keep money in the account rather than spending it. These accounts will penalise you if you go over the withdrawal limit, meaning you will miss out on the bonus interest. Most accounts of this nature do not have a time limit on the bonus interest, so are well suited to longer term savings goals.
There are some savings accounts which offer a bonus rate and have a minute or no base rate. This can make the savings account appear more attractive however, if the bonus rate only lasts for a few months or involves tight restrictions to your cash; it may not be an ideal savings account for you. That is why it is so important to compare savings accounts at RateCity and check the bonus rate features and conditions.
The table to the right lists some of today's best interest rates for savings accounts.