What is the purpose of lock and key? To protect your home, valuables, and other essentials, right? Similarly, you can lock away your savings account and protect your hard-earned money against unnecessary expenses.
But how does a lock savings account work? Let us learn more about a lock savings account, including how it works and the best options available for your financial needs.
Also, check out Beem to get updated interest rates and compare the best high-yield savings accounts that align with your savings goals and priorities.
What Are Locked Savings Accounts?
A locked savings account locks in your money for a certain period, making it impossible to access it during that time. The interest rate is usually higher as a result.
Fixed-rate bonds are a common form of locked savings accounts. Savings accounts with fixed interest rates lock money in for a specified period, usually between six months and five years and see more
How Does a Lock Savings Account Work?
An informed decision can be made if you understand how locked savings accounts work. A predefined period, usually from a few months to several years, is specified when you open such an account. Financial institutions offer higher interest rates than regular savings accounts in return.
Who Are Locked Savings Accounts Right For?
The right savings account for you is a locked savings account if you can afford to lock away a lump sum without needing access. As an alternative to volatile investments like stocks, they also offer a lower level of risk.
What Kind of Locked Savings Account Terms Are Available?
The following are the most common types of locked savings accounts:
6-Month Fixed Rate Bonds
A 6-month fixed-rate bond offers the lowest interest rate of any no-access account since they are the shortest term available. Investing in them could grow your money quickly without tying it up for long.
1-Year Fixed Rate Bonds
One-year fixed-rate bonds offer competitive interest rates for short-term fixed-term savings accounts. You can grow your money and earn a bonus if you comply with the account terms.
2 Year Fixed Rate Bonds
The 2-year fixed-rate bond is one of the most popular forms of no-access savings accounts, offering competitive interest rates and the ability to grow your savings pot over a short period.
3 Year Fixed Rate Bonds
The interest rate on 3-year fixed-rate bonds is often higher than that on 1- and 2-year no-access accounts since your money will be locked away for longer.
5 Year Fixed Rate Bonds
Due to compounding interest and bonus payments when the bond matures, 5-year fixed-rate bonds usually offer the highest return on investment.
Pros and cons of locked savings accounts
Pros:
- With Fixed Term bond you can count on your saving to grow continuously over the agreed period this comes under Guaranteed savings Growth
- FSCS deposit protection – The bank with a UK registered institution and your savings are less then £85,000 per person/ per banking group
- Fixed term bonds are very low risk factor , they provide a secure option for saving your money
Cons:
- Once you have fixed term bond , you won’t have access to your fund until the term expires , Limited access to your money during chosen term
- The more you deposit the higher the interest you will earn , which may be barrier for those with limited funds available for a lump sum deposit
- Capability to earn lower interest rate if market rate increases , The fixed interest rate offer firmness which means you might miss out on high interest rates if market rate increase during your term and leaving you locked into lower rate until maturity
Top Bank offering Locked saving account (like certificates of deposit or CDs
1. Ally Bank
Ally Bank offers various CD options with competitive interest rates and flexible terms.
2. Marcus by Goldman Sachs
Marcus offers high-yield CDs with no fees and competitive rates.
3. Discover Bank
Discover Bank provides CDs with flexible terms and competitive interest rates, along with a range of other banking products.
4. Capital One
Capital One offers CDs with various term lengths and competitive rates, allowing customers to choose the option that best suits their savings goals.
5. Synchrony Bank
Synchrony Bank offers CDs with competitive rates and a range of term lengths, providing options for both short-term and long-term savings.
Conclusion
Investing in locked savings accounts is a good idea since they offer higher interest rates than easy access or notice accounts. The money you deposit into these savings accounts will be locked in for your chosen term, so only open one if you have a lump sum you won’t need to access. It is an excellent opportunity to save more for future goals and earn higher interest rates quickly. Beem offers a seamless banking experience and the best high-yield savings accounts at no hidden costs or unnecessary fees.
FAQs
Can I withdraw money from a locked savings account before maturity?
One can withdraw money from a locked savings account before maturity, but a penalty will be charged. This penalty is usually equal to some months’ interest rates.
How much interest does a lock savings account earn?
Interest rates are variable and depend on which type of savings account you select and the duration of the lock. Usually, the interest rate is higher than what you get on a regular savings account, which is more advantageous.
How long does it take to get money from a locked savings account?
The duration of the lock is what you decide for your savings account. You can select from six months to up to five years for lock duration, and each duration has its benefits.
What is a locked savings account for six months?
Bonds with a 6-month fixed rate are typically the shortest-term no-access accounts, offering lower interest rates than longer-term bonds.
