Welcome to our comprehensive guide on notice savings accounts, the perfect choice for savers seeking a balance between earning higher interest rates whilst maintaining access to their funds with a bit of forward planning.
This guide delves into the specifics of notice savings accounts, highlighting how they work, the advantages they offer, and the key factors to consider before opening one. We’ll discuss scenarios where a notice savings account could be the best fit for your financial strategy. Whether you’re saving for an upcoming goal or seeking to enhance your savings growth while retaining some flexibility, this guide will equip you with the knowledge to navigate the landscape of notice savings accounts confidently.
What is a notice savings account?
The defining feature of a notice savings account is that account holders must provide notice to the bank before making a withdrawal. A common benefit of these types of accounts is that account holders can often receive higher interest rates compared to easy access accounts, helping to maximise their savings.1
How do notice savings accounts work?
Notice savings accounts provide a structured way to save money and require you to give advance notice before withdrawing your funds. The notice period can vary, typically ranging from 30 to 180 days (although Recognise Bank offer a 7 day notice account, too), depending on the terms of your account. This means that if you need to access your savings, you must inform your bank and wait for the notice period to elapse before you can withdraw your money without incurring penalties.
You can generally continue to add money to your notice savings account over time, unlike fixed-rate accounts that usually require a single lump-sum deposit. This can make notice savings accounts an attractive option for those looking to build their savings gradually.
At Recognise Bank, you can make deposits into your notice savings account via a simple money transfer through the banking app, online, or over the phone of your nominated UK bank account.
How do you withdraw money from a notice savings account?
Account holders can withdraw money from their notice savings account by notifying the bank. Once they’ve outlined the amount that they wish to withdraw, the notice period begins. Upon completion of the notice period, the money will be transferred to the relevant account (which at Recognise, would be either another Recognise savings account or your nominated UK bank account – the account which you linked your savings account to during your application).
For example, if you have a 30-day notice savings account, the money will be in your account 30 days after you make your withdrawal request.2
How do interest rates on notice savings accounts work? How do they differ from other savings accounts?
Interest on your deposits in a notice savings account is typically calculated daily and applied monthly or annually, depending on the Terms & Conditions of your account. The interest rates can be fixed or Public variable. At Recognise Bank, our notice savings accounts offer a variable interest rate and while most banks only pay interest annually, Recognise lets you choose how often you receive your earnings – monthly or annually – giving you more control over your finances. Recognise Bank also allows any interest earned to be paid either into your notice savings account, another Recognise Bank savings account (excluding fixed rate accounts) or your nominated UK bank account.
Check out our Notice saving accounts
One of the common benefits of notice savings accounts is the enhanced interest rates they tend to offer. Especially when compared with easy access savings accounts which allow individuals and businesses to put their savings to work and accrue more interest. Even once you make a withdrawal request, your account will still continue to benefit and earn interest until the money is withdrawn. However, businesses and individuals should consider the current base rate environment and their individual needs when opening their account, to determine what rate and term is right for them.
Key benefits of notice savings accounts
- Higher interest rates: Notice savings accounts commonly offer interest rates that are higher than other savings account types, especially easy access savings accounts. Though this is subject to market conditions at the time.
- Encourages financial discipline: Individuals may be tempted to withdraw their savings from an easy access savings account, but notice savings accounts force account holders to think twice. This can make it easier to adopt healthy spending and saving habits.
- Flexibility with security: Notice savings accounts are more rigid than easy access saving accounts, but they offer more flexibility than fixed-term saving accounts, which often have much stricter withdrawal processes.
Considerations when opening a notice savings account
- Reduced accessibility: Generally speaking, your money will be out of reach until you’ve given sufficient notice to the financial institution. This means that holding money in these accounts may not be suitable for urgent financial situations.
- Penalties for early withdrawal: In some cases, it may be possible to withdraw funds from a notice savings account prior to the end of the notice period. However, these withdrawals often incur penalties, which can undermine the overall advantage of using this type of account.
How can a notice savings account work for you?
You have established an emergency fund
You won’t be able to immediately access money in your notice savings account. As such, it’s important to consider your options for accessing funds in an emergency or unexpected expenses.
You’re planning for mid to long-term financial goals
Notice saving accounts are often thought to be best suited for individuals and businesses with mid to long-term financial objectives. If your savings goal will take six or more months, then the higher interest of a notice savings account may be beneficial.
You want to encourage financial discipline
Notice savings accounts can push account holders towards responsible financial habits. It encourages planning and saving, while also acting as a deterrent against impulsive withdrawals and spending.
Are notice savings accounts good for businesses?
It’s not just individuals who may be able to benefit from a notice savings account; businesses might, too. These types of accounts can present a way to earn additional interest on operational reserves.
Businesses can utilise notice savings accounts as part of their broader business financial planning and liquidity management strategies. Notice accounts could be useful for businesses that have sufficient cash flow and capital access for the foreseeable future. Please note that it is important to conduct your own research based on the individual business needs, as requirements can vary.
The most commonly asked questions about notice savings accounts
- Are there any minimum deposit limits?
Each financial institution sets its own minimum deposit limit, which can range anywhere from £1. At Recognise Bank, the minimum deposit is £1,000. - Can I withdraw my funds early in special circumstances?
It’s sometimes possible to withdraw funds from a notice savings earlier than the notice period however, this is often at the discretion of the bank and usually only in exceptional circumstances where a penalty is still likely to apply. - What happens if the interest rate on my notice savings account goes down?
If interest rates decrease, you’ll earn less interest. Equally, you’ll earn more if the interest rate goes up. - How is a notice account different from a fixed-term savings account?
Notice savings accounts and fixed-term savings accounts are both long-term savings solutions. With a notice account, you can make a withdrawal request at any point and the money will be released once the notice period has been reached. Fixed-term savings accounts are for a set amount of time, and it’s not possible to make a withdrawal request until that time has lapsed.
1 Depending on current market conditions.
2 Depending on the time at which you make your withdrawal request. Please refer to the Terms and Conditions of your account to verify the cut-off times for making a withdrawal request.
Important information
This content is provided for information only and should not be treated as tailored financial advice for you. Please speak to an independent financial adviser or other financial professional before taking any decisions based on the information provided in this blog. You are responsible for your own financial decisions and neither the author nor Recognise Bank will be responsible for any losses, of whatever kind, that you might suffer as a result of you relying on this post.
