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Notice Accounts

A Notice Account will typically offer a higher rate of interest than an instant access account offered by the same bank or building society. The higher rate should compensate the saver for the inconvenience of not being able to draw his cash the day that he wants it.

The length of notice that needs to be given should always be clear when the account is opened. This is important because, should the saver need his money back more urgently than he expected, the bank or building society may offer the alternative of instant withdrawal with a loss of interest equal to the notice period. Thus the saver with a 90 day notice account who needs his money back may find he has lost 90 days' interest on his savings; a penalty not commensurate with the slightly higher interest offered by the account.

At first glance these are simple accounts with a simple restriction. This can be complicated by factors such as:

* The bank offering instant access on larger deposits for an account advertised as a notice account. The saver is getting notice account rates of interest on an easy access account. However this benefit will cease if the balance on the account drops below a threshold value

* Falling interest rates. Being told that your account will pay higher interest in times of rising rates does not feel like a hardship. Being told your account will pay lower rates, but that you can do nothing about this during your notice period can seem decidedly less fair! Where you choose to save in a variable rate notice account (especially where the notice is long) you could potentially be vulnerable to sudden steep falls in the rate you receive. Where you are considering a longer period of notice at a time of falling interest rates you might like to bear in mind the alternative of a shorter term fixed rate account.



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