With so many different types of savings accounts out there, it can be difficult to know which is right for you. Here we answer the most common questions about opening a savings account to help you make an informed decision.
If you’ve ever run a savings account comparison, you’ll know there’s an abundance of options available, from many providers. While having a choice is great, wading through savings account types and learning about interest rates can be overwhelming.
In this guide, we take a look at frequently asked savings account-related questions in a bid to help you find the information you’re looking for.
1. How do savings accounts work?
When you open up a savings account, you’re committing to paying into that account. In return for having a savings account with a provider, they will pay you interest.
The bank uses your money to provide other people with loans, on which they charge interest.
Despite this, you’re always able to access your money.
Under the Central Bank’s Deposit Guarantee Scheme (DGS), your money is protected up to an equivalent of €100,000 per depositor and bank.
2. What type of savings accounts are there?
There are two main types of savings accounts available in Ireland:
Regular monthly saver
- These accounts are for putting aside a set amount of money monthly. For example, if you’re saving for an event, holiday, or Christmas.
- You can set up a monthly standing order from your current account to save.
- The minimum account balance is relatively low.
Lump-sum saver
- These accounts are suited to those who want to put away large, one-off sums of money. For example, if you’ve received an inheritance or have previous built-up savings.
- You can usually add extra money to these accounts on a periodic basis, but there's often a minimum amount you have to add.
- There are three different types of lump-sum savings accounts available.
3. What types of lump-sum savings accounts are there?
The three main types of lump-sum savings accounts are:
- Easy access account - where you have almost instant access to your money
- Notice account - where you have to give a specified notice period to access your money
- Term deposit account - where you put away your money for a fixed amount of time e.g. three or five years
You can learn more about these account types and their features in this guide here.
4. What is a children’s savings account?
A children’s saver account, also known as a parent saver account, is set up by a parent/guardian for the child’s benefit, to save for their future.
These can either be regular or lump-sum savings accounts, and they offer easy access. They typically pay more competitive interest than standard savings accounts. However there are usually quite low limits to how much you can save.
5. Should I pay off my debts before setting up a savings account?
We recommend paying off any outstanding loans or debt that you owe before you start saving.
The interest you’re charged on your debt will usually be far higher than any interest you’d earn on your savings, so it’s more financially beneficial for you to pay off your debts first.
6. Will I pay tax or other fees with a savings account?
When you first open a savings account, there may be a fee, which can be as little as €10. Aside from this, there are no transaction fees or maintenance charges.
However, you’ll need to pay a penalty fee if you withdraw money without notice for term deposit and notice accounts.
The interest you earn on your savings is subject to a tax known as Deposit Interest Retention Tax (DIRT).
At present, DIRT is charged at 33% on all interest payments. It’s deducted by the account provider before you receive the interest.
In certain circumstances, people may be exempt from paying DIRT, for example, if you are aged 65 or over.
7. What is a fixed-interest savings account?
This is an account where the interest rate is fixed for a predetermined amount of time, and will not change during that period.
Fixed rates offer certainty, as you’ll know exactly how much interest you’ll earn over the term, but access to your savings is usually restricted.
If interest rates rise across the banking sector, you won’t benefit from these increases.
8. What is a variable-interest savings account?
This is an account where the rate of interest on your savings can rise or fall.
The rate usually fluctuates in accordance with the European Central Bank’s (ECB) rate but is ultimately at the discretion of your bank.
Variable rates are unpredictable, so you could benefit from rising rates, but equally could be at a disadvantage should they fall.
9. What requirements are there to open a savings account?
If you’re ready to open a savings account, you may need the following:
- Proof of identification: For example, a passport or driving licence.
- Proof of address: This can come from a utility bill dated within the last 6 months (gas, electricity, or broadband).
- Proof of PPSN (Personal Public Service Number): Documents such as a payslip or Tax Return Form will provide evidence of this.
10. What should I consider when opening a savings account?
To find the best savings account for you, consider the following:
- What you’re saving for
- Whether you want to save a lump sum or put regular savings away
- How much you have to deposit
- The interest rate
- How accessible you want your savings to be
- If online banking is available
- If you can make direct debits or standing orders from the account
You should also review the terms and conditions of the account. There may be:
- A minimum deposit and balance required
- A minimum lodgement or withdrawal for regular savings
- Penalties to pay to withdraw money
11. How do I close my savings account?
It may be possible to close certain accounts online, while to close others you may have to visit a bank branch.
It might not be possible to close a term deposit account before the term ends. However, if you can, you may incur a penalty.
If you wish to close your savings account, you should contact the financial institution it’s with to determine how to proceed.
12. Will I make any money on my savings?
There are a few factors that will determine how much interest you earn:
- The Annual Equivalent Rate (AER) reflects the interest you’ll actually earn on savings. It’s generally quite low, and almost non-existent at present.
- Due to the negative overnight deposit rate, some banks charge negative interest rates.
- Inflation also has a direct impact on savers, as rising inflation will compel the European Central Bank (ECB) to push interest rates up. An increase in interest rates could result in savers receiving more of a return.
13. Will having a savings account help my credit score?
Credit history reports don’t consider savings accounts, as they primarily focus on your ability to repay loans you currently hold or have taken out in recent years. It also factors in any monthly repayments you may have missed.
However, when applying for a mortgage, you’ll need to show the lender that you can pay for the deposit on the property. Setting up a savings account and making regular deposits, indicates that you can save and manage finances accordingly.
14. Can I have more than one savings account?
Yes, you can have more than one savings account.
It’s possible to open as many savings accounts as you want if you have different savings goals in mind.
For example, you might choose to open a term deposit account for long-term savings that has a higher interest rate, and also a demand deposit account for an emergency fund that’s easily accessible.
The Central Bank’s DGS only protects savings of up to €100,000. If you have more than this amount to deposit, it would be wise to spread the money over multiple savings accounts.
Compare saving accounts on bonkers.ie
If you’re searching for the right savings account to suit your needs, try out our free savings account comparison tool. We compare interest rates and account features from Ireland’s leading financial institutions.
Did you know that we also have other comparison services? You can compare energy, broadband, insurance types, and other banking products too.
Helpful saving articles
- Learn how to run a savings account comparison on bonkers.ie.
- Take a look at our article on alternative savings options, or listen to our podcast episode on the topic.
- If you’re looking to start saving, trying to cut the costs of your household bills is a good place to start. Here are 8 ways bonkers.ie can help you save money
You can stay up to date with all the latest saving tips with our blog and guide pages.
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Main sources
ccpc.ie, centralbank.ie, moneyguideireland.com.
