Online savings accounts

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Savings accounts can be a great way to grow your money, and online savings accounts make growing your money that little bit easier. Here, we look at online savings accounts and how they work, how they’re different from traditional savings accounts and how to compare accounts to get the one that’s best for your saving needs.

Can you open a savings account online?

If you’ve ever asked yourself “can I set up a savings account online?”, you’ll be pleased to know that the answer is yes. An online savings account is simply a savings account you can access online. You can use your online account to make deposits and withdrawals from anywhere and at a time that suits you.

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What is an online savings account?

An online savings account is just like any other savings account, but it’s predominantly managed online. While some online savings accounts can also be managed in-branch, even if you’re in a physical bank you’ll probably still have to access your account on a personal device such as your smartphone or laptop.

How do online savings accounts work?

Online savings accounts work in the same way as traditional savings accounts in that you earn interest on the money you deposit. Most online savings accounts allow you to make deposits from an account linked to your savings account. If you choose online savings accounts from a high street bank with brick-and-mortar premises, you may still be able to make deposits and withdrawals in person.

How do online savings accounts differ
from traditional savings accounts?

The main difference between online savings accounts and traditional savings accounts is, of course, that you can manage your account online. You can access your account any time you wish, providing convenience if you are unable to visit a branch.

Online savings accounts in the UK often feature more competitive interest rates than traditional accounts. It’s always best to shop around and compare different savings accounts.

Who is an online savings account right for?

An online savings account is a great option if you need your savings to be easily accessible, for example if you don’t drive or can’t get to a bank to open or manage your savings account. 

They may also be a good choice if you get motivation to save by checking your account regularly from the comfort of your own home. Online savings accounts also typically allow you to transfer money into other accounts, which is convenient in situations where a family member or friend lends you money and you wish to transfer it back to them. 

What are the benefits of online savings accounts?

Online savings account provide many benefits, such as:

  • They’re convenient and easily accessible – use your computer or mobile phone to manage your savings from anywhere
  • Online savings accounts may offer higher interest rates
  • Many online savings accounts are free to open or have low fees
  • Online savings accounts are generally simple and intuitive to use
  • You could save time as you don’t have to visit a branch

Pros and cons of online savings accounts

When deciding if an online savings account is the right option for you, it can be useful to consider their pros and cons. 

Advantages of online savings accounts

  • Accessible from anywhere, providing you have internet connection
  • Typically offer competitive rates of interest and low fees
  • User-friendly apps from your banking provider 
  • Quick & easy to open 
  • Considered safer than traditional banking
  • Speedy application process 

Disadvantages of online savings accounts

  • No branch access or face-time with staff
  • Banking apps and websites can very occasionally go down, which could cause interruptions
  • Depositing money can sometimes be tricky 

What is the best online savings account?

The best online savings account for you will differ based on what you need it for. You should consider things like your savings goals and financial expectations, whether you need face time with branch staff and if you have access to a device that you can use to open and manage the account. 

Of course, you should also look at things like which online savings account offers the best interest rate and take a look at the different restrictions so you know you’re opening the best online savings account for you.

How do I find the best online
savings account for me?

Before you open a savings account online, you should consider your savings goals before choosing a savings account type or interest rate. You should also check whether the account has an application or monthly fee, how easy it is to make deposits and withdrawals and whether there’s a minimum deposit to open the account. If automating a monthly deposit is important to you, that’s another consideration. Doing so will give you a better chance of opening the best online savings account for you.

As with their offline counterparts, there are many different types of online savings accounts, from fixed rate bonds to notice accounts and cash ISAs. Here are some things to consider when choosing the right online savings accounts for your needs:

1. Set your savings goal

Do you want to save for a holiday, a new car, a wedding or a house? Are you perhaps saving for retirement? Determining your savings goal will help you identify the right online savings account for your needs. For example, a lump sum account might be best if you’re saving for the long-term, but an easy access account could suit you better if you’ll need to access your money quickly.

2. Compare interest rates

When you’ve identified the best type of online savings accounts for you, it’s important to compare interest rates. Comparison tables such as this one for notice accounts are a great way of getting an overview of what’s available. If you’re looking for savings accounts with very competitive interest rates and you have a lump sum deposit that you don’t need to access any time soon, a fixed rate bond might be right for you. Fixed rate bonds generally provide higher interest rates than standard savings accounts.

3. What about taxes?

If you’re a UK taxpayer, you can earn tax-free interest up to £1,000 if you’re on the basic rate, or up to £500 if you’re a higher rate taxpayer.

4. I have more than £85,000 to deposit

The money you deposit into regulated UK banks is protected by the Financial Services Compensations Scheme (FSCS). The FSCS protection limit is £85,000 per person, per banking group. If you have more than this amount, you may want to consider spreading your savings across online savings accounts with different banking groups, so more of your money is protected.

How do I get the best interest rate on an
online savings account?

To get the best interest rate on an online savings account, you’ll usually need to deposit a larger amount or agree to adhere to more stringent restrictions than you would with a different type of savings account. 

For example, a fixed rate bond savings account will usually offer a higher rate of interest than an easy access account because of the restrictions involved.

What types of online savings accounts are there?

Fixed rate bonds

Fixed rate bonds feature competitive interest rates and might be a good option for you if you’re able to lock your money away for a set amount of time. The interest rate won’t change until your account matures, so you have the peace of mind from knowing exactly how much you’ll earn and when you can access your money. You can apply for fixed rate bonds of different durations, typically from 6 months to 5 years.

Notice accounts

Notice accounts might be right for you if you don’t know exactly when you’ll need access to your money. They offer competitive variable interest rates and flexibility that’s comparable to easy access accounts. You can choose from a variety of withdrawal notice periods, commonly 30 days or 90 days.

Easy access

Easy access savings accounts are probably the most flexible type of online savings account, as you have the freedom to withdraw your money whenever you want. You should expect lower interest rates than fixed rate bonds and notice accounts, as this type of account is focussed on flexibility.

Are online savings accounts safe?

Online savings accounts are generally considered to be more secure than traditional banking. This is down to the increased number of security checks your provider can perform, which might include emailing or texting you a code in order to access your funds. 

There are also additional steps you can take to stay safe online, such as checking if a website is legit and knowing how to avoid a bank account scam.

How to open free online savings accounts
at Raisin UK

To open high interest savings accounts online from our partner banks, firstly open a Raisin UK Account and then apply in just three steps:

  1. Log in to your Raisin UK Account
  2. Click to apply for a savings account
  3. Transfer your deposit

Accounts are free to open, and once your application is approved, you can deposit your savings and start earning money straight away.

Got any questions? Contact our UK-based Customer Services Team, who will be happy to help.

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