Notice Savings Accounts

A notice savings account is pretty much the opposite of what you’d expect from an easy access account. Being the holder of such an account means that you’ll be required to notify the bank before making a cash withdrawal.

There are several time periods for the notification, and these vary from bank to bank. Some providers will require that you post notification of a withdrawal within 30 days, others 60. In some rare cases, you’ll find notice savings accounts where the notification requirement is as little as a week.

A week may sound like a long time when compared to the easy access savings account, so why would we choose to opt for this package in the first place?

The main advantage of a notice savings account comes in the form of higher interest rates. When we place money in to a savings account, it’s not sitting there unused. The bank is actually using the money - it’s loaning it out discretely.

With an easy access account, the bank has to consider the possibility that you might come along tomorrow and demand your money. This lack of flexibility prevents them from offering the higher interest rates that we’ve come to expect from notice accounts.

By setting a notification period, the provider knows in advance and has time to get the money for you. If you put yourself in the same business scenario, it’s likely that you’d greatly appreciate the security of not having to cough up money instantly when you’re trying to lend for profit.

There are, however, hidden nuisances in the notice savings contract.

If, in the state of an emergency, you absolutely have to touch your savings, it’s likely that you’ll be penalised heavily with interest taken and possibly even a chunk sum of cash.

Some banks have begun to offer deals where you can withdraw money instantly a certain number of times for free. This works on an annual basis, but if you overstep the mark, you can expect to be punished even more heavily.

As an incentive to save wisely, you’ll often find bonus clauses for instances where you go a whole year without touching your savings - and adding more money on a regular basis. The bank will reward you for your reliability with a bonus payment that you can withdraw from your account without facing action for.

It’s a nice incentive, but the ultimate moral of the story is that if you’re going to add money to your notice savings account, you should only add what you know you’re not going to need in the short term future.

For those who can bare having their money locked away, the rewards are relatively worthwhile. Higher interest rates make for a greater return on your savings. But when we get in to the “untouchable money” field, there are many other investment schemes to consider.

If you’re saving for the future, perhaps, the stock market is likely to produce far greater returns on your money. It’s a matter of personal choice.