There are plenty of options to choose from when looking for high interest savings accounts, so being able to understand the differences and how each account works is essential.

One option is notice savings accounts, these accounts are great for those who don’t need instant access to the funds that they’re looking to save. But what are notice savings accounts and how do they work?

In this guide we’ll take you through the basics of notice savings accounts to help you make the right choice for your money.

What is a notice savings account?

A notice savings account is a type of savings account that requires you to give advance notice to your bank, building society, or savings provider whenever you want to make a withdrawal. The notice periods on these types of account can vary so it’s important to read the terms of the account in advance.

How do notice savings account work?

Notice accounts operate in a similar manner to other savings accounts, however you will need to give advance notice to withdraw funds. The notice period can vary, for example from 30 days’ notice (around one month) to 180 days’ notice (around six months).

Before opening the account, you should try to find one with an interest rate and notice period that suits your needs and circumstances. Once you’ve done this, you can deposit funds as you would with any other savings account.

When you want to make a withdrawal from a notice savings account, you will have to notify your provider in advance according to the number of days in your product terms.

Once the notice period is over, the money can be made available to you by cash, cheque or if it’s an online account, electronic transfer to a nominated bank account (depending on your account terms).

It is also important to note that notice accounts are typically variable rate accounts, which means that the interest rate you earn can go down as well as up.

How long is the notice period on these accounts?

The notice period on notice savings accounts can vary between accounts. In many cases, notice periods will range from around 30 days to 180 days. In some cases, you might find that the longer the notice period the higher the interest rate the account offers.

Advantages & disadvantages of notice accounts

As with any savings account, notice accounts have their own set of advantages and disadvantages to weigh up before you make a decision on the right account for you.

Advantages

• Higher interest rates – Notice accounts can offer higher interest rates in exchange for an agreement to not withdraw funds immediately.
• Discourages impulse withdrawals – Due to the notice periods on these accounts, it can help discourage impulse purchases thus aiding long-term saving.
• Ongoing deposits and withdrawals – Notice savings accounts can allow you to continue to deposit funds and make several withdrawals in a year, rather than restricting the amount of times you can access your savings.

Disadvantages

• Variable rates – The rates can go down as well as up and you might want to check your rights if your rate goes down*.
• Terms and conditions – Notice accounts can have other terms and conditions applied to them, such as bonuses, minimum balance requirements and deposits.
• Penalties – If you need to quickly withdraw funds from a notice account, you may find that it’s not possible or face penalties. Notice Cash ISA accounts, for example, can allow quicker withdrawals subject to loss of interest.

*If your savings provider chooses to reduce the rate, then they must notify you and give you a period of time when you can close the account without notice to move your money elsewhere. This is to ensure that you cannot be unfairly locked into an account where the savings provider is reducing the rate.

However, you may not have the same rights if your notice account tracks an external rate, like the Bank of England Base Rate, because the savings provider does not control this rate.

Think carefully because if the external rate falls, you could be tied to an account that is paying less interest while you serve notice and wait to withdraw your money.

Notice accounts vs fixed term savings bonds

Notice accounts and fixed term savings bonds are similar in that they both generally offer higher interest rates if you lock your money away for a while, however there are  some key differences.

With a fixed-term account, you lock your money away for a set period of time with the knowledge of the exact date that you’ll have access to it again. The interest rate is likely to be fixed too, so you really know what to expect.

With a notice account, you can access your money after providing notice to your Savings Provider in line with the terms of the account. The account is ongoing (it won’t close at a set date) and you may be able to access your funds more quickly than if it were locked away in a fixed term bond. However, you do need to be aware that the interest rate can change.

If you’re looking to earn higher interest and don’t mind waiting a set period of time to access your savings, a notice account could be a good option. However, if you’re certain you won’t need to access your funds until a specific date and want certainty of the interest you’ll earn, a fixed-term savings account might be worth considering.

Please note

This article is for general information only and does not constitute advice. For financial advice, please contact a qualified financial adviser to discuss your personal circumstances.