Savings account terms to check before you open one

To check a savings account's terms, read past the headline rate to the conditions that decide whether you ever earn it: when a bonus ends, how many withdrawals you can make, how much notice you must give, what the provider can change, and what happens when a fixed term ends. The rate on the advert is the easy part. The terms decide what you actually get.

Those terms are written by the provider, and that is normal. It also means the person opening the account starts at a disadvantage, because the conditions that cut the return are rarely in the headline. This guide takes each one in turn, with the kind of wording to look for and the question to ask. The clause wording below is written by us to show the pattern. It is not taken from any real agreement.

What should you check in savings account terms?

In the UK, a direct offer promotion for a savings account must include a summary box with set headings, including what the interest rate is, whether the provider can change it, and whether you can withdraw money (UK rules on its contents). In the US, a bank must give you account disclosures before the account is opened, covering the rate, balance requirements, fees and withdrawal limits. The full terms are where the conditions below live.

One note on rates. AER, gross, APY and interest rate are different measures. Read each one exactly as your document states it, and never treat one as if it were another.

When does a bonus or introductory rate end?

A bonus rate ends on the date or after the period the terms state. From then on you earn the underlying rate, which can be lower and can change.

The wording often looks something like this:

The Bonus Rate is payable for 12 months from the date the account is opened. After that date, interest is paid at the Standard Variable Rate applicable at the time, as shown on our website.

In plain English, the rate you opened the account for has a shelf life, and after it you earn whatever the provider's standard rate happens to be. The sentence does not say what that rate is today, and it does not promise to tell you when the bonus ends.

What it depends on is when the period starts, what the underlying rate is now, and whether a reminder is promised. In the UK, a provider must give notice within a reasonable period before an introductory, promotional or preferential rate stops applying (UK rules); elsewhere, look for that promise in the terms. The question to ask: what rate will I earn the day the bonus ends, and will you write to me before then?

What happens if you make too many withdrawals?

On some easy access accounts the rate drops after a set number of withdrawals in a year, and the lower rate can apply to the whole balance, not just the money taken out.

The wording often looks something like this:

You may make up to three withdrawals in each account year without affecting your interest rate. If you make a fourth or subsequent withdrawal, the Lower Rate will apply to the entire balance for the remainder of that account year.

In plain English, three withdrawals are free of consequence. The fourth changes the rate on every penny in the account until the year resets, however small it was.

What it depends on is how the account year is counted, whether the lower rate applies to the whole balance, and whether closing the account counts as a withdrawal. In the US, any limit on the number or amount of withdrawals must be in the account disclosures (US rules). The question to ask: does closing the account count as a withdrawal, and does the lower rate apply to the whole balance?

What is a notice account and how does the notice work?

A notice account pays a rate in return for a waiting period: you tell the provider you want your money, and it arrives after the notice period. Some let you skip the wait for a charge. Some do not.

The wording often looks something like this:

Withdrawals require 95 days' notice. Withdrawals without notice are not permitted except on closure of the account, in which case interest equal to 95 days will be deducted from the balance.

In plain English, the only way to get your money sooner is to close the account, and the price is 95 days of interest off the balance. If the account has not yet earned that much, the deduction can come out of your capital.

What it depends on is whether notice can be given on part of the balance, and what happens to interest during the notice period. The question to ask: if I need the money early, what exactly is deducted, and can it come out of my capital?

What can the provider change, and how much warning do you get?

On a variable rate account the provider can change the rate, and the terms say how it tells you. The notice period before a cut is a protection, because it gives you time to move the money first.

The wording often looks something like this:

We may change the interest rate on your account at any time. If the change is to your disadvantage, we will tell you at least 14 days before it takes effect, unless the balance on your account is below the minimum stated in the Account Summary.

In plain English, the provider can lower the rate whenever it likes and promises to warn you first, but only if your balance is above a threshold written somewhere else. Below it, the cut can arrive without a letter.

What it depends on is the notice period and its exceptions. In the UK, a provider must give reasonable notice before a material rate decrease (UK rules). In the US, a change that may reduce the yield or otherwise work against you must be disclosed at least 30 calendar days in advance, but a movement in a variable rate is not covered (US rules). The question to ask: which changes come with notice, and which do not?

What happens to a term deposit at maturity?

When a fixed term ends, the terms say what happens next: the money is paid out, moved to another account at a different rate, or renewed into a new fixed term on its own unless you say otherwise inside a window.

The wording often looks something like this:

At maturity, unless we receive your instructions at least 7 days before the Maturity Date, the balance and any interest will be reinvested in a new Fixed Term Deposit of the same term at the rate then applicable.

In plain English, if you do nothing, your money is locked up again for the same length of time at whatever rate is on offer that week. The window closes a week before the term ends, and the sentence does not promise a reminder.

What it depends on is whether renewal is automatic, how long the window is, and whether a reminder is promised. In the US, a certificate of deposit means agreeing to leave the money for a set time, and withdrawing early usually means a penalty (US guidance); the disclosures must state the maturity date, the early withdrawal penalty and whether the account renews automatically (US rules), and a renewing account with a term over a month gets notice at least 30 calendar days before maturity (US rules). In the UK, a provider must give notice before a fixed term account expires, explaining the consequences and the options (UK rules). The question to ask: what happens to my money if I do nothing, and when will you tell me the term is ending?

What is set-off, and which conditions sit in documents you may not have?

Set-off is a provider's right to take money from your savings to cover a debt you owe it elsewhere, such as an overdraft or a card from the same group. It rarely appears in the summary box. It sits in the general conditions.

The wording often looks something like this:

We may use any money in any account you hold with us to reduce or repay any amount you owe us under any other agreement. We will tell you when we have done this.

In plain English, your savings are not fully yours to count on if you also owe the same provider money. It can move the balance across and tell you afterwards.

What it depends on is which accounts the clause reaches, and whether notice comes before or after. The question to ask: can I have the general conditions before I open the account, and does set-off apply to this one?

What does "referenced but not supplied" mean?

Savings terms are a set of documents, not one: a summary box refers to general conditions, which refer to a rate sheet. A condition that depends on a document you do not have cannot be checked, only marked as depending on one that was not supplied. That is a finding in its own right, because a condition you cannot read is one you have not agreed to knowingly. Ask for every document the terms refer to, and read the set together.

What should you ask before you open the account?

Ask the provider the questions above in writing, and keep the answers. The ones that do the most work are the rate on the day a bonus ends, whether closing counts as a withdrawal, which changes come with notice, and what happens at maturity if you do nothing. Four of these conditions also appear in the ten sneakiest terms in savings, credit card and loan fine print, beside the ones that catch card and loan customers.

If you would like a second read of the terms before you ask, you can review your savings account terms with No Sneaky Terms. It quotes every condition from your own document, explains why it matters, shows any protection elsewhere in the same document, lists every document the terms refer to that you did not supply, and gives you the question to ask. It does not rank accounts, recommend one, or tell you whether to open it. That stays your decision.

The point is not to put you off saving. It is to make sure the rate you were promised is the rate you understand. Laws vary by country. A local lawyer or consumer protection office can tell you exactly where you stand.