Introduction to Open Money Club's guide to Cash Savings

Have some extra cash that you’d rather wasn’t sat there catching metaphorical dust in your zero interest rate bank account? You think you’d like to keep it in a cash account, as opposed to opting for a stocks and shares account? Not sure if you should switch current account, opt for an instant access account, go for a cash ISA account, or lock your money up for a fixed rate savings account? Knowing what to do with your hard earned savings can be confusing and tough to navigate. But, alas, do not fear! We are here to help.

Well there are a bunch of options out there for you. We have compiled a list of some of the most attractive ways to save your cash and compiles the best interest rates available on your cash savings. You’ll see that as a rule of thumb, the longer you’re willing to keep your cash locked up for, the higher the interest rate you can achieve on your cash savings. Use the table below to compare the best savings accounts out there and to identify the best interest rates on your cash savings.

In our guide to cash savings accounts we aim to give you the tools you need to compare the best cash accounts, let you know our favourites and give you a few explainers. You might also be interested in our guide to managed stocks and shares savings accounts or our guide to easy access savings accounts.

3 things you should probably consider

1

Use your ISA allowance. If you haven’t already done so, you should definitely consider using your ISA allowance. Latest rules mean that you can save a maximum of £20,000 in an ISA every year in either cash or stocks and shares tax-free. However, if you know for sure that you are withdrawing your money after a short period, it may not be the right move for you. Check out our ISAs explainer for more info.

2

£85k in any one institution. As a general rule of thumb, savers are protected for cash amounts up to £85k held at each regulated financial institution, So if you have more than £85k to save, you should be sure to split it across different financial institutions. Check out our 'how safe is my cash?' explainer for more info.

3

Interest Earned on Savings. Easy access savings accounts are all about the rates at the end of the day. Once you’ve decided that this is the solution for you, you’ll need to try and find the highest rate possible for your savings. We have also included some current accounts below, which often come with high rates on balances up to a few thousand to incentivise you to switch to them. You can compare the best interest on cash savings accounts vs personal current accounts and decide the best solution for you. Check out our interest earned on savings explainer for more info.

Our Picks

Atom Bank Fixed Saver

Atom bank are the new kids on the block, with their all digital banking offering. Their fixed rate savings accounts offer some of the best available, earning you 1.95% for a one year lock up up to 2.4% for locking in for up to five years.

Virgin Cash E-ISA

Virgin's Cash E-ISA offers one of the best instant access rates of 1.16%. Virgin also have some higher, fixed-rate cash ISAs - the rates are lower than Atom, but you can get your money back early for a penalty, if needed.

Nationwide FlexDirect

Nationwide offer a great incentive to switch current accounts, offering 5% interest on balances up to £2,500 for the first year the account is open. Be careful though, this offer expires after 12 months.

Compare the short list of cash savings accounts

Atom Bank Fixed Cash Saver

Account
Type:

Savings Account

Min / Max
Investment:

£50 /
£100,000

Instant
Rate:

--

Fixed
Rates:

1Y: 1.95%
2Y: 2.1%
3Y: 2.2%
5Y: 2.4%


ISA?

Atom Bank Fixed Cash savings account allows you to save between £50 and £100,000. You will receive a rate of 1.95% if you lock your money up for a year and up to 2.4% if you lock it up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period (except in exceptional circumstances). Open an account within minutes on the Atom Bank App.

Virgin Cash E-ISA

Account
Type:

Savings Account

Min / Max
Investment:

£1 /
£20,000

Instant
Rate:

1.16%

Fixed
Rates:

1Y: 1.3%
2Y: 1.66%
3Y: 1.76%
5Y: 2.0%


ISA?

Virgin Cash E-ISA offers an easy access ISA with a 1.16% interest rate, or higher, fixed rates if you lock your money up. You will receive a rate of 1.3% if you lock your money up for one year and up to 2% if you lock your money up for up to five years. You and are able to transfer your other ISAs to this account. You can withdraw funds from your account, but you will be charged between 60 and 180 days interest as a penalty. The account comes with other Virgin perks like airport lounge access. Apply online, in store or via. post.

Nationwide FlexDirect Current Account

Account
Type:

Current Account

Min / Max
Investment:

£1 /
£2,500

Instant
Rate:

5.0%

Fixed
Rates:

--


ISA?

Nationwide FlexDirect Current Bank Account is a free account. Offers an interest free overdraft for one year, which goes to a 50p per day charge for arranged overdrafts after the first year (equivalent to 20% on £1,000 EAR). Also offers 5% interest on balances up to £2,500 in your first year (so long as you are paying £1,000 into your bank each month), but that drops to 1% after the first year.

Masthaven Fixed Term Savings Account

Account
Type:

Savings Account

Min / Max
Investment:

£500 /
£250,000

Instant
Rate:

--

Fixed
Rates:

1Y: 1.8%
2Y: 2.0%
3Y: 2.2%
5Y: 2.3%


ISA?

Masthaven Fixed Term Savings Account allows you to save between £500 and £250,000. You will receive a rate of 1.8% if you lock your money up for a year and up to 2.3% if you lock your money up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period. Open and manage your account online.

Tesco Fixed Rate Cash Saver

Account
Type:

Savings Account

Min / Max
Investment:

£2,000 /
£5,000,000

Instant
Rate:

--

Fixed
Rates:

1Y: 1.46%
2Y: 1.76%
3Y: 1.8%
5Y: 2.0%


ISA?

Tesco Fixed Rate Cash savings account allows you to save between £2,000 and £5,000,000. You will receive a rate of 1.46% if you lock your money up for a year and up to 2.00% if you lock your money up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period. Apply online.

Leeds BS Fixed Rate Cash ISA

Account
Type:

Savings Account

Min / Max
Investment:

£100 /
£20,000

Instant
Rate:

0.5%

Fixed
Rates:

1Y: 1.25%
2Y: 1.45%
3Y: 1.6%
5Y: 1.8%


ISA?

Fixed rate ISA account allows you to save up to your ISA allowance. You will receive a rate of 1.25% if you lock your money up for one year and up to 1.8% if you lock your money up for up to five years. You can withdraw funds from your fixed rate savings account, but you will be charged between 60 and 365 days interest as a penalty.

Shawbrook Fixed Rate Cash ISA

Account
Type:

Savings Account

Min / Max
Investment:

£5,000 /
£250,000

Instant
Rate:

--

Fixed
Rates:

1Y: 1.15%
2Y: 1.35%
3Y: --
5Y: 1.7%


ISA?

Fixed rate ISA account allows you to save up to your ISA allowance. You will receive a rate of 1.15% if you lock your money up for one year and up to 1.7% if you lock your money up for up to five years. You are able to transfer your other ISAs to this account. You can withdraw funds from your account, but you will be charged between 90 and 360 days interest as a penalty. Apply online.

NS&I Easy Access Direct ISA

Account
Type:

Savings Account

Min / Max
Investment:

£1 /
£20,000

Instant
Rate:

1.0%

Fixed
Rates:

1Y: --
2Y: --
3Y: --
5Y: --


ISA?

NS&I Easy Access Direct ISA allows you to save as much as your ISA limit with unlimited withdrawals. You will receive a rate of 1% tax-free AER. Does not allow transfers of previous ISA allowance. Accounts can be opened and managed online or on the phone.

M&S Current Account

Account
Type:

Current Account

Min / Max
Investment:

£25 /
£250

Instant
Rate:

5.0%

Fixed
Rates:

--


ISA?

Marks & Spencer Current Bank account is free. Offers a guaranteed overdraft limit of £500, an interest free overdraft of £100 and a good arranged overdraft rate of 15.9%. The account comes with an M&S loyalty scheme (1 point for every £1 spent in M&S) and access to the M&S Savings Account (5% on £25 to £250 per month). Also offers a £125 GIFT CARD when you switch and an additional £5 per month for one year.

Tesco Bank Current Account

Account
Type:

Current Account

Min / Max
Investment:

£1 /
£3,000

Instant
Rate:

3.0%

Fixed
Rates:

--


ISA?

Tesco Bank Current Account is free. Offers arranged overdrafts at a good rate of 18.9% EAR. Also offers 2 clubcard points for every £1 spent in Tesco (double the usual) and 3% savings interest AER on balances up to £3,000.

TSB Classic Plus Current Account

Account
Type:

Current Account

Min / Max
Investment:

£1 /
£1,500

Instant
Rate:

3.0%

Fixed
Rates:

--


ISA?

TSB Classic Plus Current Bank Account is free. Offers an interest free overdraft of £25 and an arranged overdraft rate of 19.84% EAR with a £6 monthly fee (equivalent to a total EAR of 28.6% on £1,000). The account comes with up to £10 cashback every month and also offers 3% interest on savings balances up to £1,500.

Club Lloyds Current Account

Account
Type:

Current Account

Min / Max
Investment:

£1 /
£5,000

Instant
Rate:

2.0%

Fixed
Rates:

--


ISA?

Club Lloyds Current Bank Account is free as long as you pay £1,500 in each month (otherwise it's £3 per month). Offers 2% interest AER on balances up to £5,000 and also offers an annual lifestyle benefit (cinema tickets, magazine subscription, etc). Offers an interest free overdraft of £100, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).

Santander 123 Current Account

Account
Type:

Current Account

Min / Max
Investment:

£1 /
£20,000

Instant
Rate:

1.5%

Fixed
Rates:

--


ISA?

Santander 123 Current Bank Account has a monthly fee of £5. Offers arranged overdrafts for between £1 and £3 usage fee per day depending on overdraft limit (BEWARE - £1 on £1,000 is equivalent to 40% EAR), with 4 months free when you first switch to Santander. Also offers 1 - 3% cashback on household bills (you can calculate this on their website) and 1.5% interest on balances up to £20,000.

Coventry BS Easy Access ISA

Account
Type:

Savings Account

Min / Max
Investment:

£1 /
£20,000

Instant
Rate:

0.9%

Fixed
Rates:

1Y: --
2Y: --
3Y: --
5Y: --


ISA?

Coventry BS Easy Access ISA allows you to save as much as your ISA limit with unlimited withdrawals. You will receive a rate of 0.9% tax-free AER. Does not allow transfers of previous ISA allowance. Open and manage an account online, on the phone, in branch or via. post.

Our summary table in a non-exhaustive list of just some of the major products out there. We’ve tried to keep the column headers to a minimum, while providing you with the information we think you will care about the most. Before opening any bank or savings account, you should be sure that you do a full review of the product on its website and thoroughly read the terms and conditions. None of the information in this table is designed to provide advice, but only to empower you to help make your own decision. If you have any suggestions on how we can improve our table, please drop us a mail.

Atom Bank Fixed Cash Saver


Atom Bank Fixed Cash savings account allows you to save between £50 and £100,000. You will receive a rate of 1.95% if you lock your money up for a year and up to 2.4% if you lock it up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period (except in exceptional circumstances). Open an account within minutes on the Atom Bank App.


Minimum Investment: £50
Maximum Investment: £100,000
Account Type: Savings Account
Instant Rate: 0.0%
1 Year Fixed Rate: 1.95%
2 Year Fixed Rate: 2.1%
3 Year Fixed Rate: 2.2%
5 Year Fixed Rate: 2.4%
ISA?


Apply


Virgin Cash E-ISA


Virgin Cash E-ISA offers an easy access ISA with a 1.16% interest rate, or higher, fixed rates if you lock your money up. You will receive a rate of 1.3% if you lock your money up for one year and up to 2% if you lock your money up for up to five years. You and are able to transfer your other ISAs to this account. You can withdraw funds from your account, but you will be charged between 60 and 180 days interest as a penalty. The account comes with other Virgin perks like airport lounge access. Apply online, in store or via. post.


Minimum Investment: £1
Maximum Investment: £20,000
Account Type: Savings Account
Instant Rate: 1.16%
1 Year Fixed Rate: 1.3%
2 Year Fixed Rate: 1.66%
3 Year Fixed Rate: 1.76%
5 Year Fixed Rate: 2.0%
ISA?


Apply


Nationwide FlexDirect Current Account


Nationwide FlexDirect Current Bank Account is a free account. Offers an interest free overdraft for one year, which goes to a 50p per day charge for arranged overdrafts after the first year (equivalent to 20% on £1,000 EAR). Also offers 5% interest on balances up to £2,500 in your first year (so long as you are paying £1,000 into your bank each month), but that drops to 1% after the first year.


Minimum Investment: £1
Maximum Investment: £2,500
Account Type: Current Account
Instant Rate: 5.0%
ISA?


Apply


Masthaven Fixed Term Savings Account


Masthaven Fixed Term Savings Account allows you to save between £500 and £250,000. You will receive a rate of 1.8% if you lock your money up for a year and up to 2.3% if you lock your money up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period. Open and manage your account online.


Minimum Investment: £500
Maximum Investment: £250,000
Account Type: Savings Account
Instant Rate: 0.0%
1 Year Fixed Rate: 1.8%
2 Year Fixed Rate: 2.0%
3 Year Fixed Rate: 2.2%
5 Year Fixed Rate: 2.3%
ISA?


Apply


Tesco Fixed Rate Cash Saver


Tesco Fixed Rate Cash savings account allows you to save between £2,000 and £5,000,000. You will receive a rate of 1.46% if you lock your money up for a year and up to 2.00% if you lock your money up for up to five years. You will not be allowed to withdraw money while still in the fixed rate period. Apply online.


Minimum Investment: £2,000
Maximum Investment: £5,000,000
Account Type: Savings Account
Instant Rate: 0.0%
1 Year Fixed Rate: 1.46%
2 Year Fixed Rate: 1.76%
3 Year Fixed Rate: 1.8%
5 Year Fixed Rate: 2.0%
ISA?


Apply


Leeds BS Fixed Rate Cash ISA


Fixed rate ISA account allows you to save up to your ISA allowance. You will receive a rate of 1.25% if you lock your money up for one year and up to 1.8% if you lock your money up for up to five years. You can withdraw funds from your fixed rate savings account, but you will be charged between 60 and 365 days interest as a penalty.


Minimum Investment: £100
Maximum Investment: £20,000
Account Type: Savings Account
Instant Rate: 0.5%
1 Year Fixed Rate: 1.25%
2 Year Fixed Rate: 1.45%
3 Year Fixed Rate: 1.6%
5 Year Fixed Rate: 1.8%
ISA?


Apply


Shawbrook Fixed Rate Cash ISA


Fixed rate ISA account allows you to save up to your ISA allowance. You will receive a rate of 1.15% if you lock your money up for one year and up to 1.7% if you lock your money up for up to five years. You are able to transfer your other ISAs to this account. You can withdraw funds from your account, but you will be charged between 90 and 360 days interest as a penalty. Apply online.


Minimum Investment: £5,000
Maximum Investment: £250,000
Account Type: Savings Account
Instant Rate: 0.0%
1 Year Fixed Rate: 1.15%
2 Year Fixed Rate: 1.35%
3 Year Fixed Rate: --
5 Year Fixed Rate: 1.7%
ISA?


Apply


NS&I Easy Access Direct ISA


NS&I Easy Access Direct ISA allows you to save as much as your ISA limit with unlimited withdrawals. You will receive a rate of 1% tax-free AER. Does not allow transfers of previous ISA allowance. Accounts can be opened and managed online or on the phone.


Minimum Investment: £1
Maximum Investment: £20,000
Account Type: Savings Account
Instant Rate: 1.0%
1 Year Fixed Rate: --
2 Year Fixed Rate: --
3 Year Fixed Rate: --
5 Year Fixed Rate: --
ISA?


Apply


M&S Current Account


Marks & Spencer Current Bank account is free. Offers a guaranteed overdraft limit of £500, an interest free overdraft of £100 and a good arranged overdraft rate of 15.9%. The account comes with an M&S loyalty scheme (1 point for every £1 spent in M&S) and access to the M&S Savings Account (5% on £25 to £250 per month). Also offers a £125 GIFT CARD when you switch and an additional £5 per month for one year.


Minimum Investment: £25
Maximum Investment: £250
Account Type: Current Account
Instant Rate: 5.0%
ISA?


Apply


Tesco Bank Current Account


Tesco Bank Current Account is free. Offers arranged overdrafts at a good rate of 18.9% EAR. Also offers 2 clubcard points for every £1 spent in Tesco (double the usual) and 3% savings interest AER on balances up to £3,000.


Minimum Investment: £1
Maximum Investment: £3,000
Account Type: Current Account
Instant Rate: 3.0%
ISA?


Apply


TSB Classic Plus Current Account


TSB Classic Plus Current Bank Account is free. Offers an interest free overdraft of £25 and an arranged overdraft rate of 19.84% EAR with a £6 monthly fee (equivalent to a total EAR of 28.6% on £1,000). The account comes with up to £10 cashback every month and also offers 3% interest on savings balances up to £1,500.


Minimum Investment: £1
Maximum Investment: £1,500
Account Type: Current Account
Instant Rate: 3.0%
ISA?


Apply


Club Lloyds Current Account


Club Lloyds Current Bank Account is free as long as you pay £1,500 in each month (otherwise it's £3 per month). Offers 2% interest AER on balances up to £5,000 and also offers an annual lifestyle benefit (cinema tickets, magazine subscription, etc). Offers an interest free overdraft of £100, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).


Minimum Investment: £1
Maximum Investment: £5,000
Account Type: Current Account
Instant Rate: 2.0%
ISA?


Apply


Santander 123 Current Account


Santander 123 Current Bank Account has a monthly fee of £5. Offers arranged overdrafts for between £1 and £3 usage fee per day depending on overdraft limit (BEWARE - £1 on £1,000 is equivalent to 40% EAR), with 4 months free when you first switch to Santander. Also offers 1 - 3% cashback on household bills (you can calculate this on their website) and 1.5% interest on balances up to £20,000.


Minimum Investment: £1
Maximum Investment: £20,000
Account Type: Current Account
Instant Rate: 1.5%
ISA?


Apply


Coventry BS Easy Access ISA


Coventry BS Easy Access ISA allows you to save as much as your ISA limit with unlimited withdrawals. You will receive a rate of 0.9% tax-free AER. Does not allow transfers of previous ISA allowance. Open and manage an account online, on the phone, in branch or via. post.


Minimum Investment: £1
Maximum Investment: £20,000
Account Type: Savings Account
Instant Rate: 0.9%
1 Year Fixed Rate: --
2 Year Fixed Rate: --
3 Year Fixed Rate: --
5 Year Fixed Rate: --
ISA?


Apply


Explainers for Cash Savings Accounts

Cash Savings Accounts

What is a cash savings account?
Cash savings accounts are designed for you to earn some interest just for holding your cash and savings in a particular account. These come in a few forms - cash ISAs, easy-access savings accounts (where you can withdraw your money instantly, free of charge) and fixed rate cash savings accounts (where you lock your money up for a set period of time in the hope of a higher interest rate).

Who can open a cash savings account?
Mos cash savings accounts are available to anyone who is aged 16 and over, but if you are under 18 it's worth checking the account terms and conditions before you proceed. Some cash savings accounts may also require you to have been resident in the UK for a certain amount of time (e.g., for the last 3 years), so if you have recently moved to the country you should double-check each bank’s policy here.

Can I have more than one cash savings account?
Absolutely. You can have as many cash savings accounts as you like in most circumstances. You just need to be sure that you only use your ISA limit of £20,000 in total across all ISA accounts. Also, if you have more than £85k cash, it is advisable that you spread it across different financial institutions (see below).

Will my cash savings account cost me anything?
The majority of cash savings accounts are free to use. However, if you are using a personal current account (as opposed to a traditional cash savings account) to access a superior savings interest rate, there are some accounts that will charge banking fees. If this is the case, you will need to make extra sure you are getting the deal you hoped for. Another thing to note is that if you are in a fixed rate account and withdraw your money before the end of the fixed period, you will likely be charged a penalty (between 1 month and 1 year interest rate).



Cash Savings - How Safe is my cash?

The last thing you want is for a bank to go bust and for you to lose your savings, so let’s go over how you are protected from the worst case scenario.

Are my savings protected in a cash savings account?
As a general rule of thumb, your savings, whether in an ISA, instant access account or fixed rate savings account, are protected for cash amounts up to £85k held at each regulated financial institution. This is thanks to the Financial Services Compensation Scheme (FSCS), which covers all UK-regulated current or savings accounts as well as cash held in ISAs or SIPPs.

What if I split my savings across multiple accounts?
This is important: it’s £85k per regulated institution, not £85k per account. So, for example, holding £170k split across two different accounts at PotentiallyRiskyBank Ltd is no good. If PotentiallyRiskyBank Ltd goes bust, then you’ll only be covered for £85k. However, if you had £85k in an account at PotentiallyRiskyBank Ltd and had another £85k at DefinitelyRiskyBank Ltd, you would be able to recover 100% of your savings if both banks go bust.

How do I know if my cash savings accounts are at the same financial institution?
The tricky bit is knowing what banks are actually a part of the same authorised financial institution. Because if DefinitelyRiskyBank Ltd from the example above is actually a subsidiary of PotentiallyRiskyBank Ltd, and they are regulated under the same authorisation, then you’d only be able to recover £85k. And it’s not always immediately obvious that banks are part of the same institution just from their name. A real life example is if you held £85k in an account at Halifax and another £85k at Bank of Scotland, you are only covered for £85k, as the banks are part of the same financial institution.

As a quick guide, we’ve compiled a table below of some of the banks which are linked together as part of an institution.

You can view our blog post on How Safe are Your Savings? for further detail and a summary of which institutions are part of the same regulatory authorisation.

What if I have less than £85k?
Even if you don’t have savings in excess of £85k, it may still be prudent to spread your savings across two different banks, as if a bank collapses, you may have a period of time where your savings are completely inaccessible. But, if you won’t need immediate access to you finances, you will be covered.

How does this work for joint accounts?
Cash in joint accounts are treated as being covered for £85k per person. So together, the account is protected for up to £170k.



Cash ISAs

Whenever you read about savings, you will probably hear a lot about ISAs. So what are they and why should you care?

What is an ISA?
ISA stands for Individual Savings Account, and they allow people to save or invest a certain amount of cash every year free of taxes.

How much can I save in an ISA?
It differs year on year, depending on government policies. At the moment, your annual ISA allowance is £20,000.

Your ISA allowance is per year. Once you’ve saved as much as your ISA allowance, that’s it, you can’t add anymore to the account. Also, if you withdraw the savings from your ISA at any point, you have lost your allowance, you can’t re-add until the new tax year. Your ISA allowance will not roll over year to year, so to get the maximum benefit you should always aim to save your entire allowance every year.

What kinds of ISAs are there?
An easy access ISA is just that… It’s an ISA that allows you to access your cash easily. This means you should be able to withdraw your savings instantly, preferably online, without paying a penalty fee.

To get slightly higher rates on your cash ISA savings, you may have to lock your money up for a certain period of time. Generally, the longer you commit to, the higher the rates you can benefit from. You technically can access your money at any time, but you will be hit with some sort of penalty fee. You can read more about what’s on offer in our guide to cash savings.

If you have an even longer time horizon and you can accept some more risk, you can also invest your ISA in a stocks and shares account. You can read more about what’s on offer in our guide to managed investments.

I can get higher rates in my current account. Should I still open an ISA?
If you are definitely only planning on saving for 12 months, and after that you are going to withdraw your money, then you should absolutely just go for the highest rate you can possibly get for that period of time.

If there’s a decent chance you are going to leave your ISA savings indefinately, then you should always try and use your allowance while you can. Even if rates are not good this year, they may be a lot more attractive in future years. If you don’t use your ISA allowance, you will lose it.

Can I switch my ISA provider?
Yes. You can definitely switch ISA providers. But you will have to check the policy of where you want to switch to, as they may only be offering certain rates on new ISA money and not accept transfers of previous years’ ISAs.

Should I just go with my bank’s online cash ISA?
Just because a certain bank is right for your everyday, personal banking, doesn’t mean it’s a good choice for your cash ISA savings. With central bank rates so low at the moment, many cash ISAs offer rates very close to zero, so just defaulting to your banks offering may not be a good choice.

We would always recommend that you review your ISA holdings at the start of every year. It’s a good time to review everything on offer from a fresh perspective and ensure you are using your ISA allowance where possible.

Don’t be scared of switching savings accounts. Providers want to attract you, and with online technology the whole process can be pretty pain free and quick. It’s definitely worth a little bit of effort.



Interest Earned on Easy Access Savings Accounts

Once you’ve figured out the kind of cash savings account you want, it’s all about the best interest rates.

What is AER?
Interest rates are often quoted in AER, which stands for Annual Equivalent Rate. AER is designed to make comparing interest rates easier. The calculation assumes that you keep earning interest over a year and takes into account factors such as compound interest. The bottom line is, when you want to compare interest rates, look for the AER number to ensure you are comparing apples to apples. This applies to cash savings accounts and most other accounts you may review.