Before you open up a saving with fixed-rate deals, there are things that you need to know. Fixed-rate saving can be a great financial choice for you if you want a guaranteed rate over a specified period. The returns for fixed-rate accounts are usually higher than those of easy-access accounts. However, you must be ready to lock money away for the set period because most fixed-rate accounts do not allow withdrawals. Additionally, you will not benefit from any rise in the rates during that period. Thus, a fixed-rate saving account is ideal for you if you are comfortable with the given rate over the specified period.
Consider the term period
Although fixed-rate saving deals provide guaranteed rate, it is important to consider the saving period. Unlike easy-access accounts which have variable rates, fixed-rate savings provide the same rate throughout the investment term. This means that even when rates rise, you will not benefit from this rising. Thus, if the interest rates increase rapidly, you will not benefit from the flexibility of ditching and switching to another account that pays more. Therefore, consider the investment term to avoid fixing your money for a longer period because this will hinder you from benefiting from the rising rates of other accounts.
Know the exact amount that your savings will earn and premature withdrawal fines
It is crucial to know what you will earn from your savings in advance. Usually, the longer the chosen term the higher the earned interest. Nevertheless, you should consider your other needs as well. For instance, if the unexpected happens, are you allowed to withdraw your funds or increase your deposits? Make sure that every aspect of the earnings that you will get from the savings is clarified before you open up a fixed-rate deals account. Additionally, consider the minimum investment that you can make with the fixed rate saving account and fines that you are likely to incur if you withdrawal your money before the end of the investment term.
Pay off debts before you fix your savings
If you have debts whose interest cost is more than what you can earn on your savings, it is better that you pay them off first. If for instance you have $1,000 on your credit card at 20%, this will cost you $200 a year if the balance is constant. In 2% savings, you can earn $20 in a year. This means you would be $180 better off when repaying the credit card than when saving the money.
Basically, these are some of the things that you should know before you open up a saving with fixed-rate deals. Nevertheless, the peace of mind that comes with fixed-rate deals saving makes this the best option for some modern investors.