Deposit accounts

Whether your reason for saving, it is a good idea to save some money on a regular basis. Many savings accounts give you instant access to your money so you can get at it when you need to. Saving is different to investing which is usually for a longer-term.

Here we explain:

Types of savings accounts
How they work
Access to your money
Differences between fixed and variable rate 
Factors to consider when choosing an account
Information you must be given about deposit accounts

You can also read our information on other types of savings accounts, including;

Credit union accounts
Student and children accounts

Types of savings accounts

You can choose from a wide range of accounts, depending on how much you want to save and what access you want to your money. Many accounts can be opened with as little as €10 and you can save either regular amounts or lump sums, and sometimes both.

There are no transaction fees or maintenance charges with these accounts, which are available from banks and building societies, credit unions and state savings.

How they work

Some accounts offer higher interest rates than others, so shop around for the best return on your money. Interest rates on savings and deposit accounts may be either fixed or variable.

The AER (annual equivalent rate) or CAR (compound annual rate) will help you compare rates on different accounts. The higher the AER or CAR, the more interest you earn, but remember a higher rate may mean you have less access to your money. The following table shows how €1,000 grows at an interest rate of 2.5% CAR.

Inflation happens when prices increase in the economy. You can protect your money being eroded by inflation by looking for saving accounts where the interest rate after tax is greater than the rate of inflation.

How do I get access to my money?

Savings accounts give you access to your money either immediately or by giving notice of withdrawal. You can choose between short, medium and long-term accounts such as:

• a demand account has a variable rate of interest and allows you to withdraw your money immediately if you need it.
• a notice account also has a variable interest rate of interest but you must give notice to withdraw money, say one or more months' notice. In return, you get a better rate of interest.
• a term or fixed-rate account - you get a fixed rate of interest if you leave your money for a set period of time, say one or two years. If you need to withdraw your money earlier, you will usually get less interest.
• guaranteed bonds - these are similar to fixed term, fixed rate accounts but you may need to invest a lump sum of at least €5,000. You get a guaranteed rate of interest provided you do not withdraw your money until the end of the savings term, which is generally between three and five years.
  

The difference between fixed and variable rate

Fixed interest rates stay the same for a set time so you know what return you will get. You will not benefit from any rate rises but you will not lose out if rates fall.

You usually have to tie up your money for a set time to get a particular fixed rate of interest. If you need to withdraw early, or want to switch accounts to get a better rate, you may get less interest than the fixed rate you signed up to.

Variable interest rates can fall or rise when interest rates change. If rates fall, you get less interest on your savings. If rates rise, you get more. Most variable rate accounts allow you to withdraw your money immediately, so you can always move your money quickly if you see a better rate on offer.

You usually have to pay a Government tax (called DIRT or Deposit Interest Retention Tax) on any interest you earn on savings and deposit accounts. If you are over 65, you may be exempt from paying DIRT. You can get more information on the Revenue website.  

Factors to consider when choosing a deposit account

• The interest rate
• Access to your money
• Are there transaction facilities such as direct debits and standing orders?
• Deposit interest retention tax (DIRT)
• Is telephone or internet banking available?
• What are the Terms and Conditions of the account, for example:
  • Is there a minimum deposit required to qualify for that rate?
  • Is there a minimum lodgement or withdrawal for regular savings?
  • If the account has a variable rate, is there a guaranteed link to some other rate such as the ECB rate?                       
  • Is the deposit for a fixed period? If not, what notice is required to withdraw money?
  • With a fixed-term deposit, what penalties must you pay if you want to take out my savings early?
  • Can you make regular payments such as direct debits or standing orders from the account and is there a charge for these services?   

Information you must be given about deposit accounts

Under the Central Bank's Consumer Protection Code your bank must give you a statement at least once a year for every account you have with over €20 in it. If you have a term deposit with a term of one year or more, you bank must let you know that it will come to the end of its term at least 10 days beforehand.

Credit union accounts

Credit union savings are normally held in share accounts and some offer deposit accounts. You can withdraw your money on demand from most credit union accounts, but you may have to keep a certain amount of savings if you also have a loan with that credit union.

Credit union accounts are similar to deposit accounts, but they pay you a yearly dividend rather than a certain rate of interest. Dividends vary from about 1 per cent to 3 per cent of your savings. You can withdraw your money at any time, though there may be restrictions on the amount you can take out if you also have a loan with the credit union.

Becoming a credit union member

Credit unions are community-based organisations that provide services and loans for their members. To become a member you must fall within a 'common bond'. This means you must:

• be living or working in a particular area
• be employed by a company which has a credit union
• be a member of a professional body that runs its own credit union.

You need to be a member to open a credit union account. You can get more information on credit union membership from the Irish League of Credit Unions and the Credit Union Development Association.

What rate of return do you get on your savings?

Credit unions usually pay you a yearly dividend rather than interest on your savings. The rate given will depend on the level of profit your credit union made the previous year, so it is not guaranteed.

You will have to pay a government tax (DIRT) on your dividends, but some credit unions also offer Special Term Share Accounts, which offer tax-free dividends, subject to certain terms and conditions. To qualify for tax free benefits, you must leave your funds in the account for either 3 or 5 years.

Student and children accounts

• Accounts for children are usually simple, easy to use and have no charges. You can open them with a very small amount of money, often as little as €1. But as with a "grown-up" account, make sure you shop around for the best interest rate on offer.
• Accounts for secondary school students usually offer ATM cards, but you have to keep the account in credit at all times and they offer no loan or overdraft facility. There is a limit to how much you can withdraw and typically you will not have to pay fees and charges.
• Student current accounts (third level) offer many of the same benefits as ordinary accounts, such as ATM and debit cards but they are also usually free of charges. Many come with gifts but don't be seduced by the "freebies".

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