Savings accounts may seem simple and straightforward, but finding the best means digging below the headline figures and the spin, says Sam Barrett.
The first step is to rid yourself of two outdated assumptions: that notice accounts are more generous than instant-access accounts, and that people with large sums to invest should opt for tiered accounts.
Traditionally, notice accounts, which require up to four months' notice if you want to withdraw your cash, offered more interest than instant-access accounts. So you were likely to look for a notice account in order to get the most interest possible. But times have changed and nowadays instant access accounts are more competitive.
No need for tiers
The second old-fashioned assumption that can lead us astray is that if we have a reasonable chunk of money we should look for a tiered account offering more interest to those with more than a set amount to save.
But today it won't necessarily mean you'll get a better rate than someone with a few pounds in a different savings account.
What kind of account?
Once you've ditched these assumptions, the next step is to decide what kind of account you need.
If you want to save monthly to build up a pot over time, one option is a regular savings account. These offer higher rates of interest than normal savings accounts, provided you pay money in regularly and don't need to make frequent withdrawals.
Should you fix it?
If you have a lump sum that you can tie up for a reasonable period and don't expect to dip into, the highest rates you can get are with fixed-rate accounts, where the interest rate is fixed for a set period of time, usually between six months and five years.
However, while a fixed-rate product can mean more interest and more certainty, this can be a bit of a gamble, as you don't know what will happen to variable rates during the period of your fix.
Because of this uncertainty, some financial advisers eschew longer-term fixes.
Look beyond the bonus
Once you've decided what kind of account you're looking for, it's time to check interest rates. Higher rates tend to be paid by banks that are internet-based or phone banks as opposed to branch-based. Online providers, without the overheads of running branches, can afford to pay more to savers.
But it's not enough to simply pick the account paying the highest gross rate in a table. There are a couple of tricks that providers use to get their accounts to the top of best-buy tables, which may mean you don't get the interest you were expecting in the long run.
Bonuses are one of the most common ways of distorting the best-buy tables. This is where a higher, introductory rate is offered for a limited period, for instance six months, after which the account reverts to a lower rate.
So, for instance, the actual return over one year for an account with a six-month introductory rate will be the quoted annual equivalent rate (AER), but, if you hold the account for more than one year, the real average rate will be much lower than the AER.
Nothing lasts forever
Of course, bonus or no bonus, interest rates can change at any time, and your table-topping deal may no longer be as competitive after a few months.
There are other tricks providers use to lure customers. One is to launch a new issue of a product. Because there's no money in the new issue, the bank can offer a higher interest rate than that available to existing customers, and with no requirement to tell existing customers.
Prefer to settle down?
If you don't want to become a so-called 'rate tart', moving your money whenever you can get a better deal, you might want to consider one of the accounts that offers a guarantee. For example, base-rate trackers are offered by several providers. They peg their interest rates to the Bank of England base rate so you can be sure they won't slip out of line.
You must also be careful to check for any restrictions or penalties. Sue Hannums, savings manager at IFA Chase de Vere, warns: "Some accounts are marketed as instant-access, no-notice accounts, but if you make more than the specified number of withdrawals in a year you can often earn less interest than on a standard current account."
At your service
Finally, customer service should be another consideration, as a bad experience can cost you dear in terms of time and aggravation.
To gauge how the different banks' and building societies' customer service promises stack up, market research company Consumer Analysis Group (CAG) performed a 'mystery shopper' exercise.
Two companies - Bradford & Bingley and NatWest - got the bottom score for total confusion, with many other high street names also performing badly.
At the opposite end of the spectrum, CAG gave six companies their top rating. These companies were Cahoot, Cheltenham & Gloucester, ING Direct, Intelligent Finance, Smile and the Yorkshire Building Society.
By considering all these aspects, or simply dipping into our comparison tables, you should get a good idea of which is the best account for you. But whatever you go for, make sure you check your savings on a regular basis.
