Best Regular Savings Accounts: First Direct Raises Rate to 3.5%

Anyone looking to kick-start the savings habit might consider getting a regular savings account, especially since today First Direct increased the interest rate on its version to 3.5 percent.

A regular savings account is effectively a monthly savings account that allows savers to set aside cash up to a certain amount each month.

Although the cost of living crisis is preventing Brits from putting money aside every month, regular savings accounts can be a good home for their money for those who can still afford it.

The tariffs offered for regular savings offers are more generous, since the providers limit the monthly savings to a small three-digit amount.

The best regular savings accounts pay up to 3.5 percent compared to the best East Access savings accounts, which pay between 1 and 1.5 percent.

While they will be of limited use to wealthy savers as they limit customers to maximum deposits each month, they do offer them a great solution for those who have built up little or no savings.

Almost half of easily accessible savings accounts contain £500 or less, Paragon Bank’s analysis of the latest CACI data has shown. CACI collects savings data from more than 30 leading providers.

With an estimated 62 per cent of UK savings in easy access, it represents a sizeable proportion of savers, according to this data.

Derek Sprawling, director of savings at Paragon Bank, said: “As households grapple with rising costs for food, energy and clothing, it is worrying that half of overnight savings accounts contain less than £500.

“This suggests people may not have much to fall back on if they have a savings account at all to deal with rising expenses.

“We know times are difficult for many people but hope savers are aware of the security that maintaining a savings buffer can offer.

“It’s also important that when you have money in a savings account, that it works as hard as it can for you by earning a good interest rate.”

Split rate Maximum monthly deposit Maximum credit Maximum return after 1 year Can you withdraw at any time?
First direct (from April 28) 3.5% £300 £3,600 £68 no
NatWest 3.25% £150 £1,000 £25.58 Yes
Royal Bank of Scotland 3.25% £150 £1,000 £25.58 Yes
Nationwide BS 2.5% £200 none £32.26 Up to 3 payouts in one year
Santander 2.5% £200 £2,400 £32.26 Yes
Saffron BS 2% £50 £6,000 £6.50 Only once a month
Credit: This is Money & Moneyfacts
Best Easy Access Plans: Interest after 1 year from monthly deposit vs. lump sum
rate £150 a month £1,800 flat rate £200 a month £2,400 flat rate £300 a month £3,600 flat rate
1.5% £15 £27.19 £19 £36.25 £29 £54.37
1.2% £12 £21.72 £16 £28.96 £23 £43.44
1.1% £11 £19.90 £14 £26.53 £21 £39.80

The top Easy Access offers currently on offer pay only 1.5 percent. The best regular savings accounts, on the other hand, offer 2 to 3.5 percent — although some have strict eligibility criteria.

Tariffs are more generous, with providers capping the amount you can deposit each month to a small double or triple digit amount.

It will take time to build up your credit and therefore limit the total interest you can earn.

This means that while it’s suitable for someone looking to save a little each month, those who already have a lump sum will earn more interest by stashing everything at once in an easy-to-access store rather than higher-yielding regular ones Savings to act stuck.

Given that 81 percent of easy-to-access accounts earn less than 0.1 percent, according to Paragon Bank’s analysis, many savers could benefit by checking whether their bank has a regular savings offer.

However, only some banks and building societies offer regular savings accounts, meaning you may need to switch to take advantage of these offers.

Which regular account is best?

First Direct has increased its regular savings rate from 1 percent to 3.5 percent – fixed for one year.

The account can be opened online or via the app with a minimum of £25 and customers can deposit up to £300 a month, totaling £3,600 a year, but you’ll need the current account.

Those whose monthly payments are less than £300 have the option to carry the allowance forward from previous months. This is more generous than its competitors.

Someone who puts £300 into this account each month would earn £58 in interest after a year. By contrast, someone putting the same amount into the best readily available offer and paying 1.5 per cent would make £25.

However, unlike some regular savings accounts, you cannot make partial withdrawals with First Direct.

If you close your account before the end of the 12-month period, it will only pay you interest at the standard floating rate of 0.1 percent.

NatWest and RBS both currently pay 3.25 per cent on balances up to £1,000, with a maximum monthly deposit of £150 allowed.

However, once savers exceed £1,000, their interest rate drops to 0.3 per cent on balances between £1,001 and £5,000.

Someone who deposits £150 into this account every year could expect to make £26 over the course of a year.

Santander and Nationwide both pay 2.5 per cent to save £200 each month – up to £2,400 in any given year.

For some who stash the maximum of £200 a month in one of these accounts, they could expect to earn £32 in interest over the course of a year.

For all of the above, you must be a checking account customer. One, open to all, is from the Saffron Building Society and pays 2 percent. However, it caps savers at £50 a month, meaning profits will be very small.

In terms of market-leading offering, this is actually offered by the Cambridge Building Society, which pays 5 per cent interest on it Extra bonus regular savings accountwith monthly deposits capped at £250 with a maximum balance of £3,000.

However, unlike many other regular savings offers, withdrawals from this offer are only allowed for a year after the account is opened.

Chase Bank currently offers the best deal for easy access, paying 1.5 percent. You must have a checking account with Chase to apply.

Chase Bank currently offers the best deal for easy access, paying 1.5 percent. You must have a checking account with Chase to apply.

For those trying to withdraw, they face a 90-day interest penalty to close their account and withdraw their funds.

Customers must also have had another savings or mortgage product with the building society for at least three years to be eligible, which is a significant hurdle to overcome.

The account opening is also not possible online and must be set up either in the branch, by post or by telephone.

This means that for an eligible saver who puts aside a maximum of £250 each month, £82 in interest would have been accumulated after one year.

Another niche regular savings offers are offered by the Bath Building Society.

It pays 4.15 per cent to anyone living, working or studying in Bath and can save between £10 and £50 a month in the account.

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Best Regular Savings Accounts: First Direct Raises Rate to 3.5%

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