Ask Sindie: Do online savings accounts always give the top rates?

The best home for £4,000... worries over phone switch... cover for traveller with heart condition
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Q: I've come into a modest cash windfall of £4,000.

Rather than settle an existing personal loan early, I'd like to put this money in a place where it earns some interest while I still have access to it.

I have looked at a number of internet savings accounts and wonder if these are a good option. Are they any better than phone or branch deals?

MS, London

A: In a word, probably - but it all depends where you look.

Many savers assume that web accounts offer higher rates of interest because of the lower costs to the bank. Less money spent on staff and equipment in expensive office space should translate into better returns for consumers - right?

Not always. When they were launched in the late 1990s, many web savings accounts boasted rates significantly higher than their phone and branch counterparts. But the anticipated rush of new business failed to materialise and banks turned their attention back to other types of account. Today, internet savings deals are just another weapon in banks' armouries for tempting customers. So although you should expect a slightly higher rate, you won't always get it.

For example, Citibank's online saver account offers only 3.3 per cent; Smile, 3.25 per cent; and Barclays' E-Savings, 4.08 per cent.

Elsewhere, though, Bradford & Bingley's eSavings 2 instant access account pays 4.85 per cent; Cahoot, 4.75 per cent; and ING Direct, 4.41 per cent.

If you're happy to accept some of your returns in the shape of a temporary bonus rate, Alliance & Leicester's (A&L) Online Saver issue 2 earns you 5.15 per cent; this drops back to 4.25 per cent at the end of March next year.

While finding a decent account should pose no problem, Anna Bowes of independent financial adviser Chase de Vere warns that your savings will be taxed on the interest earned.

So, depending on your circumstances, she recommends that you go instead for an online mini cash individual savings account (ISA), where you can deposit up to £3,000 a year to earn interest tax-free.

There are a number of online, no-notice instant access ISAs, says Ms Bowes, that won't penalise you for withdrawals. The Halifax is currently offering just such an account at 5 per cent, which can be run by internet and telephone. You can open it at a branch.

The A&L mini cash ISA pays 5.2 per cent but includes a 0.7 bonus until April next year.

Bradford & Bingley also offers a web mini-cash ISA paying 5 per cent, as long as you put £1,000 into it.

Once you have used up your mini ISA allowance, Ms Bowes continues, you could put the remaining £1,000 into a normal internet savings account.

Q: After nearly 30 years with BT, I've decided to switch our home telephone landline to the Post Office.

As part of the process, BT has just sent me a letter confirming it has received my request for a transfer of the business.

However, I've spotted a worrying paragraph that doesn't make any sense to me at all.

It reads: "You may be liable for termination charges if your telephone and other products and/ or services cease within the minimum period set out in your agreement with BT (if applicable)."

What on earth does this mean? And do I need to be worried?

ND, Bristol

A: BT says its statement is simply a "catch-all" that refers to any contracts you may be breaking - usually a landline or broadband internet service.

Your longstanding loyalty to BT puts you well beyond any sort of "minimum period" agreement (usually 12 months) and as long as you haven't recently signed up for BT broadband and decided to switch this service too, there's nothing to worry about.

If you have, the charge for breaking a 12-month broadband contract is the full, cumulative cost of every month left on your deal.

Q: I'm due to travel to North America in April but suffer from atrial fibrillation [where the heart beats irregularly]. I have travel insurance through Lloyds TSB, my bank, but it has declined to cover me if I suffer an incident because of this. I tried elsewhere, but Norwich Union said the same. Can you help?

KH, Swansea

A: A trial fibrillation affects three in every 1,000 people, according to figures from the British Heart Foundation (BHF), so you are not alone in your quest for cover.

Both Norwich Union and Lloyds TSB say that any refusal is down to individual circumstances - facts gleaned from you in a medical screening or interview process. These usually include how long you've had the heart problem, whether you take medical treatment and how stable your condition is.

Since insurers will have their own guidelines, a trawl of firms could take a long time - with no guarantee of cover at the end of it.

However, the BHF has a list of insurers and brokers that patients have found very helpful in the past. This includes Bupa, Freedom Insurance Services, Marks & Spencer and Manor Insurance. You can find the list on www.bhf.org.uk; go to the "search" option and type in "travel insurance".

The BHF stresses that this is not a recommended list, simply a guide.

You will, of course, have to pay an extra premium for your condition. Again, this may vary between insurers, so get several quotes.

If you need help from our consumer champion, write to Sindie at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email sindie@independent.co.uk. We cannot return documents, give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given

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