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Pros and Cons of having a savings account

Author:    Crosspay   |   May 25, 2020

Saving money is undoubtedly one of the most fruitful habits and highly rewarding in the long-term. Depending on how you save, for how long and how much, you may be able to earn a lot of money just on interest rates.
Before analysing the benefits (or lack of) of savings accounts, let’s take a look at some of the different types of savings accounts available.

Types of Savings accounts

Regular savings account

Regular savings account requires the user to deposit some amount of money every month with limited minimum and maximum deposits. It rewards you with the interest rates on the overall savings that you build up over time rather than paying your interests on your monthly deposits. For example, if you are depositing  £100 into your savings account every month for a year, it will calculate the interest rate on £12,000 at the end of the year. It also has limited options for withdrawing the cash during the course of time. You may also lose your interest rates if you miss your monthly deposits.
Hence, in addition to your regular savings account; it is also advisable to have emergency savings building up. Banks will often pay you higher rates if you already have an existing account with them. If you are regular with your monthly payments and have minimum withdrawals, there are chances that the bank may offer you better interest rates as a  bonus.

Instant access savings account

With the instant savings account, you can deposit and withdraw money at your own pace making it the best option for emergency savings. Here, the banks will also pay you the interest rate and also provide cards for instant access to your money 24/7.
The interest rates for instant access accounts are lower than those of regular savings or bonds but are better than the current accounts. You will also be taxed for the interest rates that you receive on your savings.

Notice savings account

With notice savings account your money is locked in for a longer time and you should also notify the bank in advance if you want to withdraw the money; which is usually 30 to 90 days. The perks here are that if you lock away your money with the bank for a longer time you will be rewarded with better interest rates. The downside is that if you withdraw your money from the notice account for any emergency use; you might lose your interest rate. On the other side, instant or regular accounts also offer similar if not higher rates compared to a regular or instant savings account.
Hence, having an instant or regular savings account is a better deal if you think that you may have to withdraw your cash or do not have emergency savings.

Cash Individual Savings Accounts (Cash ISAs)

Cash ISAs are the best possible way to earn tax-free interest on your savings with a limitation on the amount of deposit. However, if you exceed your allowance of annual savings; you might have to pay taxes on the interest you earn. With Cash ISAs, you can save in the forms of cash, stocks, and shares or a combination of them with a limit set up to £20,000 for the year 2018-19. If your savings are above the limit, then you can switch to other available savings option.
You are limited to opening only one ISA per year and withdrawing cash from your ISA does not reset your limit for that year.

National Savings & Investments (NS&I)

NS&I is one of the largest savings service provider in the UK with more than 25 million registered customers. It provides 100% security and peace of mind to the customers as it is owned by the government itself without a limit to the amount that is protected.
NS&I offers both taxed and tax-free forms of savings or investing. With NS&I, you can save money in form of both savings account as well as in the form of bonds. In addition, it also offers a special Children’s Bonds; where parents can save for their children on their behalf.
It also offers Index-Linked Savings certificate which is a form of tax-free savings account where the savings are locked in for a fixed period of time. Here, you can invest up to £15,000 and is linked to the cost of living; wherein you are rewarded with the inflation rate measured annually plus the interest rates.

Pros and Cons of Savings Account


  • Easy to open
  • Earn money through interest rates and build up a healthy cash balance for use in the future
  • More secure way to save unlike investments which have a potential risk of loss
  • Tax-free way to earn money(depending on the type of savings)
  • Easy cash, means your savings are dealt in cash and you do not have to worry about selling or using any other means to use your cash invested in the savings account


  • Difficult to access
  • Lower interest rates compared to other types of investments
  • Limited withdrawal and risk of losing interest rate when used for emergency purpose

Savings accounts have its fair share of pros and cons; however, it is often considered the best practice to save your money without the fear of losing it. It is advised to consult a professional advisor or banks to consider the best option for a savings account. They will help you in deciding a savings account depending on the amount, duration, and accessibility of money.

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