3 Things to Know about Fixed Rate Bonds
You may already have them, you may not. However, they are out there and there are some things you need to know before signing up to one. Below will be 3 things you need to know about fixed rate bonds.
What are Fixed Rate Bonds
One of the most important things to know about a fixed rate bond is what it actually is.
In simple, a fixed rate bond, also known as fixed rate savings accounts and fixed rate savings bonds, are accounts that allow you to deposit money and earn a higher interest rate.
Why do you get a higher interest rate? This is due to the account being basically ‘locked’ for a set period of time. This could be one year, two years, even ten. So this means once you have put the money in, you shouldn’t take it back out until the fixed time period is up. The next point will explain why.
Savings Tied Up
Depending on where you have opened a fixed rate bond, there may be withdrawal policies. Many companies out there that offer fixed rate bonds have a set time that you won’t be allowed to withdraw any money. Usually within the first term is when you won’t want to make a withdrawal.
If you have opened the account and have a nice lump of savings, taking them out will cost you in the first term (or what the period is set to). In some cases, withdrawing money in this term can result in you losing the interest on the savings.
Where Are the Best Fixed Rate Bonds?
There isn’t a fixed rate bond that is suited to everyone. There isn’t a ‘best’ one to pick. It comes down to what you are comfortable with and what you are looking for. Each bond account will have different fixed interests, different ‘locked’ time periods.
Therefore, when looking for a fixed rate bond, don’t go by what people say online because they may earn more/less that you and many other factors. When picking, take your time, work out what works best for you and don’t fall into the trap of taking savings out before the lock-out period.