By Sam Holder
Overview
Savings account interest rates in the United Kingdom (UK) are a bit different than those in the United States, but are determined in a similar fashion. Generally, rates are calculated by market conditions--the state of the economy and stock markets--but also can be controlled by government institutions.
Significance
Savings account rates in the UK determine the return on your investment by doing business with a bank. Keeping a close eye on your finances in a savings account is part of maintaining a healthy financial portfolio. British banks are significant in the financial world because of the long tradition of banking in the UK. The British essentially pioneered the modern system of banking, and therefore offer sound products and services.
Features
Most savings account rates in the UK are variable or adjustable. This is because a bank will often want to control how and when to adjust their portfolios to fluctuating market conditions. For example, if the economy starts to slide, many banks will cut interest rates on savings accounts--thereby decreasing your earnings--to protect against falling too seriously into debt. Also, most UK banks offer commission-free traveler's checks simply for your business.
Types
The most common type of savings account in the UK is the monthly compounding variety. With these accounts, monthly interest is calculated based on your rate, and then subsequently added to your account balance. Often, rates in the UK under favorable markets range between 3.25 and 5.00 percent. In unfavorable conditions, rates typically fall to between 2.50 and 3.5 percent. The UK was one of the first in the world to operate banks that are online only. These banks don't have branches, paper deposits or tellers; instead, the banking is all conducted on the Internet.
Identification
Finding the right account in the UK for your savings requires a critical eye for markets and bank rules. Speak with several bank officers regarding their rates and programs, making sure to ask pointed questions about the variability of their rates (ask for historic trends in the specific bank), the typical worth of an average bank customer and the strength of their balance sheet.
Warning
Be careful when signing on for an account that doesn't seem fair. Also, beware that the British equivalent of the FDIC (Federal Deposit Insurance Corporation) does not carry the full amount of deposits at all times. Therefore, while it is unlikely, in the face of a total financial collapse, England would be seriously underprepared to pay out all lost deposit funds.
About Savings Interest Rates in the UK by moneyinyouraccount.com