Factors to consider before applying for an account

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Factors to consider before applying for an account

When searching for a suitable savings account, individuals can often get caught out by a range of tricks and issues commonly set up by some banks and building societies. These mainly include:

Withdrawals
Some providers offer a higher rate of interest on the condition that a limited number of withdrawals are made each year. Some providers state less than 1 per month, while some accounts even require no withdrawals to be made to earn a bonus. Customers who breach the rules by making more than the allowed number of cash withdrawals will face a penalty.

Bonus
Providers often trick new customers with the offer of an initial bonus on the account. Adding this bonus to an account enables a provider to trick savers into thinking they have a good rate of interest. However, the bonus is normally only applicable to the account for the first 6 to 12 months of the account being opened. After this initial period the interest drops to a lower rate, while some banks and building societies have a tendency to carry on reducing the rate further. Therefore, savers that open an account which has an introductory bonus should consider moving their funds elsewhere once the bonus period comes to an ends.

Closed Accounts

Savers should watch out for some providers that offer accounts with a good rate of interest but for a short period only. These accounts are then closed to new investors and the rate of interest is gradually reduced on the account until the rate is less competitive.