Easy access or instant access accounts give you the opportunity to earn interest on money set aside for a rainy day, a holiday or a house deposit, whilst still being able to access your savings, without penalty, should you need to.
An easy, or instant access savings account is a bank account that offers you some interest on your savings, while giving you immediate (or within 2 to 3 days) penalty-free access to your funds when you need them.
Of course, this easy access comes at a price, and the interest paid on instant access savings accounts is usually the lowest out of all savings accounts (around 0.55% right now, versus 1.15% for a fixed-rate cash ISA). However, they do offer a lot of flexibility.
Furthermore, with the introduction of the personal savings allowance (PSA), most people won’t pay tax on the interest earned from an easy access savings account: basic-rate (20%) income taxpayers don’t pay tax on the first £1,000 of interest, while higher-rate (40% or 41% in Scotland) taxpayers can earn £500 from their savings before paying tax.
If you have some money to save and you’re not sure what to do with it, putting it in an easy access savings account is a good first step. (Be aware that some account providers do limit the number of penalty-free withdrawals you can make per year, however.)
With an interest rate of up to 0.55% your returns from an easy access savings account will never be huge, but it’s better than leaving your money in a current account earning 0% interest.
However, if you don’t need instant access to your money, it may be worth considering alternative savings products offering higher rates of interest, such as a fixed-rate cash ISA or stocks and shares investment ISA.
Comparison sites can help you compare similar easy access accounts to find the best one for your needs.
The main variables to consider are the interest rate offered and whether there is a minimum deposit amount. Some accounts can be opened with £1, while others might require £1,000 or even £10,000.
And with all savings products, you should ensure the provider is covered by the Financial Services Compensation Scheme (FSCS).
As the name implies, an instant access savings account lets you withdraw your money immediately at any time, with no penalties. You could transfer your money online to one of your other accounts or visit a branch to withdraw your funds in cash.
Easy access savings accounts usually allow you to withdraw money without penalties, but you might not have immediate access to your funds.
Most easy access accounts force you to pay in from and withdraw to a linked bank account, such as a current account from the same provider, and sometimes there’ll be a processing period when paying in or withdrawing from the savings account.
However, if you do your banking online, you are unlikely to notice a big difference between the two.
Most instant and easy access savings accounts have no savings cap, although you might earn a different rate of interest, depending on how much you have in there.
Many easy and instant access savings accounts give you the choice of having your interest paid out monthly or annually.
Every instant and easy access savings account has to advertise its AER; its annual equivalent rate of interest. This is the gross amount of interest that would be earned by your funds in a year, before any tax deductions.
However, unless you are in the additional rate (45%) income tax bracket, your personal savings allowance (PSA) is likely to cover any interest you earn from an instant access savings account.
Some easy and instant access savings accounts come with a temporary bonus interest rate: for example, an additional 1% of interest may be payable for the first 12 months.
After this promotional period ends, your interest rate will drop back down, typically to an interest rate below an average, non bonus savings account.
If you opt for a bonus savings account, make sure you set a calendar reminder for the end of the promotional period, when you can consider moving your money elsewhere.
You can usually withdraw your money from an instant access account immediately. However, that doesn’t necessarily mean that the money will arrive in your account instantly. Bank transfers can take a day or two to process, so factor that in if you are going to need your money by a particular date.
The answer to this question will depend upon how much interest you are being charged on your debts. If there is a high interest rate payable (for example on an expensive credit card balance or loan) it is highly unlikely that you could earn more in interest on your savings, so it is far better to clear the debts first.
Money saved in an easy access account is usually protected by the Financial Services Compensation Scheme (up to £85,000 per banking group or building society).
However, this isn’t always the case, so be sure to look for the FSCS logo, which is usually prominently featured on the supplier’s website and other marketing materials.
Interest tends to accrue on a monthly basis, but it may only be paid out annually. If you want an account that pays interest every month, check the T&Cs carefully.
There is no limit to the number of instant or easy access savings accounts you can have.
Of course, if you want to manage your money as efficiently as possible, you should ensure that your deposits are held in the accounts with the highest interest rate.
And, if your deposit exceeds £85,000, you should place the excess with a different banking group offering the next best rate of interest.
Banks use our deposits, alongside other money that they borrow, to make investments, which provide them with the money required to pay any interest they have guaranteed on savings.
The longer they hold customer deposits, the greater their opportunity for profitable investments. Since banks must keep funds available for withdrawal at any point, for easy access customers their investment opportunities are far more limited, which is reflected by the low interest rates offered.
The Bank of England has also reduced interest rates to a historically low level, as a result of the coronavirus outbreak, so interest rates on all savings products have suffered as a result.