These accounts usually pay the lowest rates of interest, often as little as 0.25 per cent, but there are some exceptions.
Portman Building Society's Instant Access Account pays an impressive 4.5 per cent on a minimum balance of just pounds 100. First Direct Bank's High Interest Savings Account offers instant access, and pays from 3 per cent on accounts starting at pounds 1. Direct Line's Instant Access Account, which is operated over the phone, pays 2 per cent on balances of pounds 1 or more, rising to 4.5 per cent on balances of pounds 500.
The newer banks, such as Sun Banking Corporation, and local building societies also often offer attractive rates.
These require you to give a set notice period before withdrawing your cash - typically one, two or three months. Interest rates are better than on instant access accounts but a minimum deposit may be required. For example, Halifax Building Society's Solid Gold Account, which requires 90 days' notice, pays from 2.75per cent interest but the minimum balance required is pounds 500.
If you should need to get at your money in an emergency, most notice accounts will allow you to do so although you will probably have to pay a withdrawal penalty equivalent to the amount of interest you would have earned had you given the required notice.
Instant access postal accounts generally offer higher interest than instant access branch-based accounts and, in some cases, more than notice accounts. However, you will often need pounds 500 or more to open an account.
The best-paying notice accounts tend to be postal accounts. Cheltenham & Gloucester's 30 day notice postal account pays 5.5per cent on an opening balance of just pounds 100.
Regular savings accounts
Several banks and building societies run accounts offering enhanced interest to regular savers. You need to find out the minimum saving required per month, the minimum or maximum period for savings, and how many withdrawals you are allowed each year.
Several small building societies run schemes for people living locally. Among the well-known banks and building societies with regular savings accounts are Abbey National, Bradford & Bingley, Bristol & West and Nationwide.
Bradford & Bingley pays 6.55 per cent on its Monthly Saver Account but you must save regularly for three years. Abbey National pays 4 per cent a year on its Regular Savings Account as long as you do not make any withdrawals - if you do, the rate falls to 1 per cent.
As an alternative, there's now the supermarket. One of the best deals around is Tesco's Clubcard Plus savings scheme which is run by NatWest Bank. Cardholders pay in money monthly by standing order and receive 5 per cent on their credit balance.
Two accounts run by National Savings are worth considering. The Ordinary Account pays 1.5 per cent on balances up to pounds 500 and 2.5 per cent after that. You can get instant access to your money at any Post Office, and the first pounds 70 of interest is tax free.
More attractive is National Savings' Investment Account. You need just pounds 20 to begin and interest starts at 4.75 per cent rising to 5.25 per cent when your balance reaches pounds 500. The account is a postal account, so you have to send an application form to National Savings when you want to withdraw money, and you must give 30 days' notice. If you do not give the notice, you will lose 30 days' interest. Interest is paid gross, so you must declare all earnings to the Inland Revenue on your tax return.
If you feel uninspired by these rates of interest, there is one safe alternative: Premium Bonds - which come in pounds 100 batches. You will earn no interest, but your money is safe and there is the - admittedly 1 in 14 million - chance of becoming a millionaire. It may well be worth a punt.Reuse content