Online savings accounts versus the rest!

Are you better off stashing your savings in an internet account or a more traditional one?

When it comes to choosing a savings account, is your decision swayed by the interest you'll receive or by whether you can access the account online?

According to Halifax, only 13% of us believe the interest rate is a factor when selecting a savings account. Instead, a mammoth 46% of us reckon the most important consideration is how the account is managed.

Unsurprisingly, online savings accounts have increased in popularity over the years. In fact, over two-thirds of savers now hold one, with more than one in 10 savers managing their online account every day.

The obvious advantage to internet savings accounts is that they allow you to manage your funds 24 hours a day, and it's easy to move money from one account to another.

But does convenience necessarily mean you'll be receiving the best rate of interest on your savings? Or does the privilege of managing your funds 24/7 come with a hefty price tag?

Best internet savings accounts

In the chart below, I've outlined four of the top easy access savings accounts that can be used online:

As you can see, the ING Direct Savings Acccount stands out head and shoulders above the rest, paying an interest rate of 2.75% AER.

What's more, although this rate is variable, it includes a fixed bonus rate of 2.22% for one year - so this means your savings rate won't drop below 2.22% for the first year at least. And the icing on the cake is that you'll only need £1 to open the account!

The best of the rest

So what happens if you'd prefer not to bank online? Many people are still reluctant to trust the internet or are simply happier banking in a more traditional way. So how do these savings accounts compare with those highlighted above?

The table below shows four of the top easy access savings accounts which can;t be run online:

Oddly enough, the top two accounts in the chart pay an interest rate of 2.75% AER - which is exactly the same rate as the ING Direct Savings Account I mentioned earlier.

But before you get too excited, the Birmingham Midshires Access Reward Account comes with a few catches. For a start, it requires you to deposit at least £1,000 - which obviously won't be convenient for everyone. And secondly, you can only make four withdrawals in the first year - if you go over this limit, the interest rate will automatically revert to a measly 0.5%! That's not exactly what I call an easy access account.

The Akbank Savings Account, however, is catch-free. But I wouldn't blame you for wondering who Akbank is. Akbank is a Turkish bank but its European headquarters are based in the Netherlands.

So how safe is it? Well, in terms of compensation, the bank falls under the Dutch Deposit Guarantee Scheme.This means that if the bank went bust, you'd receive up to €100,000 of your money. That's approximately £89,000 (£1 = 1.12 euro) and beats the £50,000 offered by the Financial Services Compensation Scheme (FSCS).

You may have also noticed that the only account in the chart allowing you to manage your money in branch is the Abbey Instant Access Saver. Although this still pays a decent rate of 2.50% AER, you'll also need a deposit of at least £1,000.

Similarly, the Stroud and Swindon Postal Account requires a deposit of £1,000, and as the name of the account suggests, you can only operate it by snail mail. What's more, you won't be able to withdraw less than £1,000 at any one time - which in my book, isn't terribly practical.

So overall, it would seem the rate of interest you receive on your savings account doesn't necessarily depend on how the account is managed. But by putting your faith in the internet, you're less likely to have to worry about complicated catches and you'll have greater flexibility!

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