Top savings deals increasingly come with strings attached that can slash interest rates

Many top savings accounts now have restrictions that can trip unwary savers, such as reduced interest rates and other complications.

Savings experts say deals with commitments are increasingly common in easy-access accounts, fixed-rate bonds, and notice accounts.

These terms include limits on the number of withdrawals, time-bound bonuses, and rules that customers must take out more than one product to get the highest interest rates.

Starting with easily accessible accounts, 14 of the top 20 deals now have some kind of restriction, according to financial data company Moneyfacts.

The best deal with easy access, HSBC’s Online Bonus Saver pays 2.97 percent interest per annum.

But if you withdraw money from the account, your interest rate for that month drops to 0.65 percent. You must also have an HSBC checking account to qualify for the deal.

>> Savings Rates: View top deals on our best-buy easy access charts

Another top deal paying out 2.81 percent, from Al Rayan Bank, is only open to savers who are existing customers.

The second-best deal pays 2.8 percent a year, from Tipton & Coseley Building Society.

But this deal only allows three withdrawals a year, and also only pays the full rate of 2.8 per cent on balances over £25,000 – below that, savers earn 2.5 per cent.

Next in line is Cynergy Bank’s Online Easy Access Account 2.75 percent offer – but this includes a temporary bonus of 0.15 percent for the first 12 months, after which the rate drops.

Moneyfacts’ Rachel Springall said, “If you look above the 2 percent rate, most easily accessible accounts now have some sort of restriction.”

Banks are adding restrictions to savings agreements so customers leave more money in the accounts, which is great for businesses but may be less helpful for savers

A spokesman for Tipton & Coseley Building Society said: ‘It is not an unusual practice to have limited access to these types of accounts.

“For us, there’s a sense that it still allows for flexibility and access to funds when needed. We look for opportunities and still offer people a good return.’

Strings attached to other types of savings agreements

These restrictions also creep into other types of savings, such as cancellation accounts and fixed-rate bonds.

Anna Bowes, from Savings Champion, said: ‘Note accounts used to be easier to access in the way they worked, and if you wanted to withdraw cash you had to pay a penalty in terms of interest loss. Now very few of them give access to the money within the term.’

According to Savings Champion, four of the top five cancellation accounts do not allow withdrawals at all during the term.

Bowes added: “The same goes for fixed rate bonds, which usually don’t give access at all before maturity. There used to be a number of providers that allowed this.

“With many deals, savers need to understand that there may be things that might prevent you from earning as much as you would otherwise.”

Why is this happening?

Savings experts say banks are introducing more restrictions on top deals to keep more depositors’ money in the books for longer, making more money themselves.

For example, banks that offer easily accessible accounts know that depositors can withdraw money whenever they want, with little predictability. Money taken out of these deals means less cash for the banks themselves to lend or invest.

So by restricting these deals, savers are encouraged to withdraw less money, which is good news for banks.

Bowes said: ‘I would suggest limiting transactions, there is less turnover on that money. That means less activity, which makes the money stickier and maybe they can invest it better and there’s less administration involved.’

According to Moneyfacts’ Rachel Springall, some restrictions on savings accounts are also due to the size of the company that is currently giving out the best deals.

“The way the market has changed is there are more challenger banks in the top buy tables,” Springall said.

‘Because of their smaller size, these banks are more aware of the money flow within their company.

“With accounts that are easily accessible, there is no guarantee that the money will be there in a day. To set a good interest rate, they have to put these restrictions on their account.”