Direct savings accounts are opeted solely online, by telephone, and by post with no posibility of visiting a bank branch to conduct business. This means they are cheaper to run for the banks, with less admin and staff costs, and so in turn they are willing to offer more attractive interest rates. Indeed, when internet direct savings accounts first appeared, some of them offered ten times the interest of a typical branch-based account, although the gap has narrowed considerably over the years.

The next choice to make is which type of savings account to go for. Amongst all the other options and features available, there are two basic kinds of account: regular savings, and deposit savings. With a regular saver account, you commit to depsiting a fixed amount every month for a certain period, often a year. Most accounts will let you pay in more than this if you are able to, but if you fall below the minimum amount in a month you will likely forfeit interest payments for that month. With a deposit account there are no such restrictions - you can put in as much or as little as you want, wheever you want. On the whole, a regular saver accunt will offer better interest rates at the price of less flexbility.In general, you pay a price for flexibility, and so accounts with more access restrictions will pay a better rate, and so are perhaps more suited to long term investments than simply serving as a way of earning interest on spare cash that might still be needed at some point.

Another factor that will affect the rate of interest you can earn is the level of access to your money you need. Basically, you can either choose a fully flexible account which lets you deposit and withdraw funds whenever you want with no charges or penalty, or a more restricted access account which might require 30, 60, or 90 days notice before withdrawals can be made without incurring an interest penalty. Some accounts go further, locking your money in for a period of years, but these accounts are more like bonds than savings accounts, and are outside the scope of this article. As we have seen, there is more to choosing a savings account than simply comaring basic interest rates. Of course, you want to earn as much interest as posible, but locking yourself into an unsuitable account might not be the best use of your money. The other main aspect to consider is how the interest is paid. Most accunts will pay your interest in one installment, once each year. Some, however, will credit your interest on a mothly basis, opening up the possibility of earning compound interest (i.e. where you earn interest on your previously earned interest). Nothing in the financial world is free though, so once again the flexibility of more frequent interest payments will be paid for with a lower rate.