A few years ago, we wrote an article on ‘how to beat pitiful savings interest rates.’ Back then the average savings interest was 0.5% AER.
With the Bank of England (BoE) base rate standing at 4% AER, we take a look at some of the best savings accounts arounds. There’s a twist though. All of the accounts featured are digital only.
Previously, digital banking was all about current accounts, but in the race to attract new customers, many are now turning to savings too.
Even Monzo and Starling, that have traditionally shied away from offering their own savings products, are now getting in on the act. This added competition brings more choice and flexibility to the consumer, not to mention some of the highest saving arounds around.
All of the accounts we cover offer full Financial Services Compensation (FSCS) on deposits up to £85,000 so you can rest assured that your money is safe.
The best easy access savings accounts
Trading 212 – 4.05% AER
Trading 212 might seem like an unlikely entry when discussing the best digital savings accounts. After all, it’s a trading platform not a savings account. Yet, it has been included due to offering 4.05% AER on uninvested pounds. On top of that, if you open a Trading 212 account using our code below, you’ll get a free share worth up to £100 once you make a deposit.
The account is quick and easy to open, and there’s no requirement to actually ‘invest’. You can simply deposit money into your invest account and enable interest. What’s more, is the interest is paid daily rather than monthly like the other accounts on our list.
Your money is protected up to £85,000 by the FSCS, but some of it might be invested by Trading 212 in a qualifying money market fund (QMMF). These are short-term, low-risk investments assets, aiming at saving.
Despite this, it is still possible, though extremely unlikely to lose some of your deposited cash in a QMMF. Should this ever happen though there’s probably larger economic concerns.
In short, it’s a little more risky than a bank account, unless you use the new Trading 212 ISA which is FSCS covered.
You are able to withdraw your money at any time you want, or turn off interest if you choose. There’s also a new Trading 212 debit card (see our review), so you can spend your cash directly.
We reviewed Trading 212 in great detail previously, and in our opinion it’s one of the best trading platforms out there. How that translates into a saving platform is more down to the individual.
Pros
- Interest paid daily
- Unlimited withdrawals
- Higher rates of interest especially on euro and dollars
Cons
- Withdrawals take a few days to reach your account
- QMMF are not totally without risk
We’ve got a deal for you. Use promo code MSA212 when you open your Trading 212 invest account or ISA and you’ll get a free share worth up to £100.
Chip – 4.58% AER instant access account
Launched in 2017, Chip is a savings and investment app that can be used to connect to your bank account (via open banking) and analyse your spending patterns, to work how much you can afford to save. It can then move this into a savings account. The app also features a growing number of investment products but in this article we’re only interested in its instant access saver.
Chip is the highest instant access savings account in our list. It offers full FSCS protection on customer deposits, and on the interest earned. This is worth noting as previously the earnings in the Chip Instant Access Saver were not covered by the FSCS. That was because rather than paying interest, Chip instead paid the interest as a bonus.
That all changed in February, when Chip announced it would scrap the bonus in favour of paying regular interest. This is a major boon for savers who now benefit from monthly compound interest.
Chip itself, isn’t a banking provider, so you don’t get an account number and sort code. Instead, you link your bank account to Chip via open banking. This provides some additional security as withdrawals can only be made to your nominated account. Deposits on the other hand can be made either direct from your bank account, via the debit card linked to that account, or via Apple/Google pay.
Using our link below to sign up for a Chip instant access saver will earn us a small commission and help support the site.
Pros
- Highest instant access interest rate
- Top up via debit card or Apple/Google Pay
- Interest calculated daily and paid monthly
- Interest now on savings up to £250,000
Cons
- Can only connect to one bank account
Kroo brank – 2.90% AER current account
Kroo is one of the UK’s newest banks, gaining its banking licence in 2022 and launching its first current account in December of that year.
Unlike the other entries in our list, Kroo doesn’t offer a dedicated savings account but instead pays 2.90% AER interest on balances up to £85,000 in its current account. That makes it the most flexible and convenient accounts in our list.
As a current account, access to your money is truly instant, but it also means that you can use it for bills and other payments too. Since interest is calculated daily, by combining money set aside for your bills, with your savings, you can earn interest on money that would likely otherwise sit idle for most of the month.
We like Kroo for its simple no fuss approach to banking. There are no snags, fees, or gotchas. The account is completely free and easy to open via the app. See our Kroo bank review for more.
Pros
- 2.90% AER on balances up to £85,000
- Up to £15 cash back
- Current account so truly instant access
Cons
- No operation of finances
Monzo – 3.0% AER Instant access saver
Monzo is the largest digital only bank in the UK. It has been a hit with consumers due to its in-app budgeting features, savings pots, and the ability to access some incoming payments a day early.
Interest on savings pots has typically been provided by third parties, but in the wake of recent Bank of England rate hikes, Monzo is now offering its own 3.0% AER instant access savings pot making it one of the most competitive instant access savings account available anywhere.
In case you’re wondering what a Monzo pot is, it’s just a place within your account where you can keep your money separate from your main balance. Some banks achieve this by offering linked or separate accounts, Monzo does this via pots.
Another promising sign is that Monzo didn’t waste any time in announcing the increase in its interest rate. Lag between Bank of England interest rate rises and banks passing on those gains to customers is something we’ve criticised Chase for, so it’s good to see Monzo taking the initiative here.
Like all the options on our list, Monzo has full FSCS proaction, but in addition is also part of the current account switching scheme (CASS), which means you can switch another UK account to Monzo.
Monzo is also offering a free £5 welcome bonus to new customers. To get the offer, sign up for a Monzo account via our link below.
Pros
- Current account so truly instant
- £5 welcome bonus
- Top class app and budgeting
- CASS member
Cons
- Only available with a Monzo current account
Chase Bank – 2.50% AER easy access saver
Chase set its sights on becoming the UKs most rewarding bank, when it launched its digital back in 2021. It offers 1% cashback on spending, and 5% AER interest on round-ups, but it’s the savings account that’s got our attention now.
At the time of launching in 2021. It offered market leading rates, but has since been slow to keep up with the Bank of England rises, though, it’s still one of the highest paying truly instant access accounts around.
Like Monzo (above) you need to have a Chase current account in order to open a savings account. Fortunately, its current account is great too. We’ve been using Chase since its launch, and so far it’s hasn’t put a foot wrong. See our Chase bank account review for more details.
Pros
- Interest paid on deposits up to £250,000
- Interest paid monthly
- Unlimited withdrawals
- Unique sort code and account number
Cons
- Slow to increase rates
- Must open a current account to get access to the saver
>> Open a Chase easy access saver account
Atom Bank – 3.55% AER instant access saver
Atom was the first digital bank in the UK. Unlike fellow challengers Starling, and Monzo, Atom chose to focus mortgages and savings.
Its Instant access saver account was one of the highest paying around at 3.55% AER on deposits up to £100,000, but is often slow to keep pace with BoE rate rises. It’s latest rate rise fixes that, but it falls to the bottom of our list on past performance.
Of course, being an instantly access account rather than an easy access account (there’s a slight technical difference), your money is available instantly anytime you want it.
Pros
- Instant access
- No minium deposit
Cons
- Must connect your current account
- Interest rate is lagging behind the other top choices
>> Open an Atom instant access saver
Short term fixed savings accounts
Instant access savings accounts are great for their convenience and flexibility, but their rates can almost always be beaten if you’re prepared to lock your money away for a fixed period.
Short term fixed savings accounts generally provide higher interest rates, without locking your money away for years. They are ideal for people saving for bit ticket items, such as deposit on a home, where you know the money isn’t going be needed for a while.
Atom – 4.6% 6-month fixed saver
Atom’s instant access saver covered above maybe shy of the best instant access rates around, but its 6 months fixed saver certainly isn’t. It’s one of the two 6-month savings accounts we’ve come across with rates at or above the 4.6% mark.
We like Atom for its slick no-nonsense app, and ease of use. Interest is paid monthly, but being a fixed account, you can’t withdraw anything until maturity i.e. 6 months. There’s a £50 minimum initial deposit, and a maximum balance of £100,000.
>> Open an Atom Savings Account
Tandem – 4.65% 1-year fixed saver
Tandem acquired Harrods Bank in 2017 allowing it limit use of the latter’s banking licence. It became popular for its Tandem credit card, that offered cashback on spending and was previously on the best credit cards to use abroad. It now focuses solely on savings and loans, and has reinvented itself as the UK’s green challenger bank.
Tandem offers an instant access savings account, at 4.4% AER, but it’s the 1 year fixed saver that is the real draw. At 4.65% it just edges Atom’s 1-year fixed saver on headline rates, and is close to the very best rate offered from any account digital or otherwise.
As always with fixed accounts, interest is paid at maturity, and you have no access to your money until the end of the the fixed term.
>> Open a Tandem savings account
Savings accounts vs ISA
Savings accounts and cash ISAs are the same thing in a different wrapper. After all, ISA stands for ‘Individual Savings Account.’ The difference between the two is that interest in an ISA isn’t taxed.
That doesn’t mean you should rush out and open an ISA though. For many, a savings account will be more beneficial.
Personal Savings Allowance (PSA)
In 2016, the government introduced the ‘Personal Savings Allowance’ (PSA). It means that basic rate taxpayers (i.e., those earning under £50,270 a year) can now earn up to £1,000 a year in interest on savings completely tax free. After that, the additional interest is taxed at 20%.
Even at interest rates of 5%, you could save almost £20,000 and still enjoy the tax free earnings.
According to Raisin, the average Briton has £9,633.30 in savings, and as such would be unlikely to exceed their PSA. Fortunately, we’ve developed a quick and easy saving tax calculator to make sure you stay on the right side of your PSA.
Higher tax rate savings
This changes somewhat if you’re a higher rate tax payer. You still get a personal savings allowance but it’s reduced from £1,000 a year, to £500. However, even at 5% AER you’d still need a savings balance of over £10,000 (which is higher than the UK average) before you’d start to pay any interest.
If you are an additional rate taxpayer, or likely to go over your PSA, then that is where a cash ISA starts to become beneficial as it allows you to deposit up to £20,000 a year. Interest on total balance of the ISA is always tax-free, but typically the interest rates on ISAs are below those of the best savings accounts.
Want more digital savings? Check out our in-depth Plum app review for digital savings and budgeting all rolled into one.
Want to see how your savings can add up over time? Use our compound interest calculator to see the power of compounding in action.