Question on Fixed Rate Savings: Can I add money each month?

CJQ

Hi All and thanks for having me at the MSE Forums!

This is a basic question, so basic that I think that none of the great guides on the site have expended the effort to mention it (perhaps it is a given, like how one needs to breathe in and out in order to survive). I am really new to world of saving after climbing my way out of debt recently and now working to put in place measures that will keep me out of (bad) debt.

Here's the scenario:
- I apply (and am accepted) on to a fixed rate savings account (no access) for 2 years @ 2.2%
- I open the account with the minimum, say, £1000

Here's the question
- can I ADD, say, £500 per month, every month, for those 2 years?

If not: what's the benefit of locking away the £1000 (i.e. what is the strategy with this type of offering)

If so: which banks offer this, because I have not been able to find them.

...yes, I really wish that my debut on this forum would have been a little less embarrassing

I really want to lock away my money for a few years, keep adding to it and give up access in return for a healthier interest rate - I thought this objective would have been met with a fixed rate, but when I learned that it is a lump sum, with no monthly additions, I was thrown off track and any counsel from you would be appreciated.

Many thanks,
CJQ

PeacefulWaters

Almost always not.

Exceptions would be regular saver accounts and the Lloyds Fixed Rate ISA.

le_loup

You are looking for a regular saver, some of which may have a one year fixed rate.

bowlhead99

CJQ wrote: »

- can I ADD, say, £500 per month, every month, for those 2 years?

If not: what's the benefit of locking away the £1000 (i.e. what is the strategy with this type of offering)

The benefit is that you have given the bank a known amount of money which you require back on a known date and you are not going to be giving them more little dribbles of cash here and there when the prevailing market rates are different later.

So, they can pick up that one fixed lump of cash and deploy it within their business on longer-term things (such as lending it to people or depositing it with other financial institutions for a decent period of time) and therefore earn money on it and be able to pay you out a higher interest rate than if you wanted a more flexible account, or you wanted to keep coming and giving them more money later when the market rates were lower and you still wanted them to honour the original advertised rate. If they know they will get a fixed amount of money for a fixed amount of time they can advertise a higher rate than a general open access account.

As the other two people above said, the product you are looking for is a 'regular saver'. That type of product allows them to pay quite a high fixed rate because they only accept a certain maximum per month and so whatever rate they advertise, they know they're not going to need to pay it out on tens of thousands of pounds for an entire year. So they can offer a good rate to drive new customers towards their bank or keep existing ones.