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More savings account rates boosted by bonuses

29 July 2009 / by Rebecca Sargent

The number of variable savings accounts that use a bonus to boost their interest rates has increased by 5.6 per cent in the last two years, according to Moneyfacts.co.uk.

Meanwhile, the level of bonus offered by savings accounts has shot up from 0.64 per cent to 1.10 per cent, while the largest bonus in the market has increased from 1.0 per cent two years ago, to 2.65 per cent.

Commenting on the bonus culture, Michelle Slade, spokesperson from Moneyfacts.co.uk said: "The savings market continues to be very competitive at present, with banks and building societies doing battle to attract savers' money.

"Providers are continuing to offer ever larger bonuses as a way of temporarily boosting the rates on offer," she adds.

In fact, of the top ten easy access savings rates currently available, seven include bonuses, and some savings account rates would be significantly reduced without the bonus.

And, "While this can provide short term gains, if savers neglect to move their money when the bonus ends, they may find themselves left with an account paying an uncompetitive rate," Ms Slade points out.

But it is not just bonuses that are catching savers out, many top savings deals launched recently come with catches such as restricted withdrawals or interest rate cuts for withdrawals.

"Savers need to ensure they fully read and understand the terms and conditions of any savings account, before they commit their money," Ms Slade urges.

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