Safe savings: Eight crucial checks before you put your trust (and hard-earned money) in new banks with top rates
- Always do your homework before banking with a name you’ve never heard of
- Check whether your savings are protected and check the bank’s online reviews
- Find out how quickly withdrawals are paid and check how your money is invested
In recent years, the best-buy savings tables have been dominated by banks and building societies unknown to many.
Now another new name – StreamBank – has launched a top one-year fixed rate savings account, paying 3.5 percent.
But before you take the plunge with a new kid on the block, it’s essential to do your homework first. Here’s what to check.
Research: Before taking the plunge with a savings name you’ve never heard of, it’s important to do your homework.
Make sure your money is protected
This is where to start. Your savings must be covered by the Financial Services Compensation Scheme (FSCS).
This protects balances of up to £85,000 – or £170,000 in joint accounts – if one provider fails. Avoid any provider without this safety net.
The offset limit will cover your money with a financial institution – if you already have money with the same group, it will count towards the total, so make sure you don’t exceed this limit.
StreamBank is registered. Find the registry here.
Reviews paint a picture
Check bank reviews on Google, Trustpilot and Feefo. The latest may not have many reviews to begin with. And keep in mind that some sites allow companies to pay to remove bad reviews.
Also remember that people are more likely to post when they have a negative experience than when they have a good one.
Phone number and response time
If it’s important to you to call to check your account status, withdraw funds, and perform other tasks, call a provider’s savings line.
This gives an indication of the waiting times and how good the staff is. Check if the number is free to call – if not, your phone bill may interest you.
Customer service: giving the provider’s special savings number during a call gives a good indication of waiting times and how good the staff are
How fast are withdrawals?
If quick access to your funds in an emergency is important, check how quickly funds are deposited into a nominated account.
Many banks say it takes no more than two hours in an easily accessible account. Others say it’s a next day service.
Getting money out of fixed rate deals can be slower. And with National Savings & Investments, redeeming Premium Bonds can take days.
Online access can be hard work
Some smaller savings providers have clumsy websites.
Kevin Mountford, co-founder of savings platform Raisin, advises looking at reviews and visiting a provider’s website to see how well it’s doing.
He says: ‘Savers are increasingly demanding user-friendly application processes. However, some providers are still struggling to offer this through laptops and mobile phones. My message is, do your homework.’
Check how your money is invested
Most savings providers give an idea of how your money is invested to fund your returns.
Usually this is through small business, personal or real estate loans. For example, StreamBank uses part of depositors’ money to borrow for commercial buildings.
Holding: Most savings providers give an idea of how your money is invested to fund your returns
Beware of ‘expected profit’
A handful of the top rates are offered by Islamic banks, such as Al Rayan and Gatehouse.
They pay “expected profit” to depositors instead of interest, meaning it’s not guaranteed.
The accounts invest in ethical, sharia-compliant activities to make a profit. Both banks are FSCS protected.
If it’s too good to be true…
Scammers target depositors with legitimate looking accounts.
Telltale signs of this include rates that are higher than elsewhere; untrustworthy social media ads and pressure tactics from people over the phone.
City regulator, the Financial Conduct Authority, warns that criminals can use the names of legitimate companies to commit fraud. For alerts from cloned companies, visit: register.fca.org.uk/s/
Stick with banks on Money Mail’s best-buy savings tables, see above, hand-picked by our savings expert Sylvia Morris. A more detailed version can be found at thisismoney.co.uk/save.
l.boyce@dailymail.co.uk