The Functioning of Savings Banks

In the UK, I’m not aware of any banks that just offer savings accounts, so not sure what is meant by the term ‘Savings banks’.

Savings accounts, though, are offered by all the main banks and building societies, and also by Internet banks.

A savings account is a bank account that offers creditor interest in return for you depositing money with the bank. For example, if your savings account offers 5% interest, and you invested 100, you would get 5 in interest at the end of the year.

The types of savings accounts that are typically available include:

1) Instant access savings accounts
As the name suggests, you can withdraw your money at any time and you won’t incur any charges.

2) Notice Accounts
An example of a notice account would be a 90 day notice account. The idea is that you get a slightly higher interest rate on the basis that you have to give 90 days notice to withdraw the funds. If you withdraw the funds without giving notice, then you have to pay a fee.

3) Savings Bonds
An example would be a 3 year fixed rate savings bond. You are guaranteed to receive the stated interest rate for the period of the bond.
You also get Equity Linked Savings Bonds where the end performance is based upon the performance of the stock market over the period of the bond.

4) Internet only savings accounts
Internet banks (and some high street banks) offer savings accounts that can only be accessed via the Internet (or via a combination of Internet and Telephony channels). They tend to offer higher interest rates than branch based accounts.

In deciding which type of savings account is best for you, then you need to decide whether you need instant access to your money and whether you’re happy to manage the account purely via the Internet. It will also be worthwhile to shop around to make sure you’ve got a competitive rate.