Bonus rates vs fixed rates

What's the best option for your savings?

Enticed by a headline-grabbing temporary bonus rate or considering fixing on a guaranteed rate? We look through the pros and cons of the two savings options.

Cashing in on the bonus  |  Checking your rate  |  Fixing on a deal  |  What will you decide?

Cashing in on the bonus

Bonus rates are normally available on instant access savings and cash ISAs. At the end of the tax year, also known as ISA season, bonus rates are often out in force on cash ISA accounts, as providers seek to attract new customers.

A bonus rate is a temporary, interest rate boosting addition to a savings account. So the basic rate of interest may be the Bank of England Base Rate, say 0.50 per cent (at May 2011), but the account is offering 3.00 per cent, because there is an additional 2.50 per cent bonus for 12 months.

While this is a temporary uplift for savings, if you don’t transfer to a new account after 12 months your savings could be sitting in an account offering a rate at a market low.

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Checking your rate

Any bonus rate on offer should be for a minimum of six months, though they are normally for 12 months. It is best to check what the bonus rate is and when it ends before committing your savings.

Whether the provider will tell you when the interest rate changes may depend on the type of account you hold, so you will not always be told your interest rate has fallen. Although, the high street banks committed in 2010 to printing interest rates on statements or providing rate information to customers.

When it comes to savings, many people suffer from inertia, and, if you don’t think you will want to be moving savings around, looking for a fixed-rate account may be a better option for making the most of your savings.

Instant Access Savings Accounts Deals
ProviderAccountInterest Rate (AER)TermApply
1.00%Instant AccessMore Info >
Earn 1.00% gross/AER Instant Access. No notice periods. Unlimited payments and withdrawals. Pay in from £100. RCI Bank are protected up to a total of €100,000 by the FGDR, the French deposit protection scheme. Manage account online.
0.75%Easy AccessMore Info >
0.75% gross/AER on balances from £1,000 to £1 million. Guaranteed to be at least 0.50% above Base Rate** until 31st December 2017. Unlimited withdrawals without restriction or loss of interest.
5.00%Current Account
Instant Access
More Info >
5.00% interest for 12 months on balances up to £2,500 for the first year. You must pay in £1,000 or more each month to receive interest (excluding transfers from any Nationwide account held by you or anyone else). 12 month fee-free arranged overdraft available. No monthly fee. Must be aged 18 or older.

Fixing on a deal

The advantage of opting for a fixed rate bond is that you will know what rate you are getting for your savings over a longer period of time. The most competitive savings rates are usually only available on the longer term accounts such as three year fixed rate bonds.

This type of account will guarantee you an interest rate, but there is little or no flexibility. Further deposits are normally not allowed, while withdrawals are penalised.

Shorter term fixed rates are available, with one-year, 18 months or two-year, if you would rather not tie your money up for too long.

Latest Fixed Rate Bond Deals
ProviderAccountInterest Rate (AER)TermApply


per annum

£1,000Apply Now >
Earn 1.85% gross/AER fixed for 4 years. Save £1,000 - £250,000. No withdrawals during the term. Individual or joint accounts available. Annual or monthly interest.


per annum

£1,000Apply Now >
Earn 1.50% gross/AER fixed for 3 years. Save £1,000 - £250,000. No withdrawals during the term. Individual or joint accounts available

What will you decide?

What option you go for, for your savings, will quite often depend on what your saving aims are and whether you anticipate needing access to your savings.

If you are looking for a level of income, a fixed rate bond paying interest on a monthly or quarterly basis may be a good option for you.

If you are saving over the short term for larger purchases and will be topping up your savings regularly, an instant access account may be a better option, but make sure you keep an eye on your interest rate.