What is a monthly income savings account?
Monthly income savings accounts are good if you’ve got a decent chunk of cash savings and you want to earn a regular income from it, there are accounts on the market which pay interest monthly, and you can choose to withdraw it or keep it in your savings pot to earn more interest.
As the name suggests, this an account pays you the interest earned on your savings monthly, rather than quarterly or annually. Many different types of savings accounts can be monthly income payers: you can find Cash ISAs, notice accounts, fixed-rate bonds and easy-access accounts that all offer this feature.
Where are the best monthly income savings account deals?
The Bank of England base rate is quite high at the moment, which means savings accounts are offering some very good interest rates
These are a few of the highest interest-paying monthly income saving accounts on the market at the moment, although things are changing quickly as providers start to pass on the latest base rate cut.
Here are five of the best on the market at the moment:
- Investec Bank plc 90-Day Notice Saver: AER 5.25%
- ICICI Bank UK SuperSaver Bond: AER 5.21%
- Oxbury Bank 90 Day Notice Base Rate Tracker (Issue 3): AER 5.13%
- OakNorth Bank 95 Day Notice Base Rate Tracker Account – Issue 3: AER 5.12%
- Vanquis Bank 90 Day Notice Account (Issue 6): AER 5.10%
Pros and cons of monthly income savings accounts
The key selling point is that you can take a regular income from your cash savings without eroding your total pot over time. You have the flexibility to choose from a range of different types of savings accounts which give you the option to take your interest monthly. You can also usually choose whether to take your interest as a payment into your bank account each month, or to leave it in your pot so it can benefit from compounding (earning interest on interest) so your pot can grow more quickly.
These accounts are best for people with large sums saved, so you can earn enough interest to get a reasonable payout each month. However, the Financial Services Compensation Scheme only covers your savings up to £85,000 per regulated financial institution, in the event your provider collapses, so if you have a lot of savings it is worth spreading them across more than one bank.
Another downside is that the current record-low rate environment is punishing savers with poor savings rates on offer. Research from Which? found there is quite a gap between the rate available on accounts that pay interest monthly versus annually. If the rate you get is lower than the rate of inflation, the purchasing power of your savings pot will shrink over time. Depending on the type of account you choose, you may also face restrictions on how much and how often you can deposit and withdraw.
Monthly income saving account alternatives
If you want to see if there are better saving account interest rates Hargreaves Lansdown offers an Active Savings product, where you can save across a range of different savings accounts without having to open up a new account each time.
We have also listed below some of the latest saving account switching offer and providers with some of the best interest rates for your savings.
| Savings Platform | Highest Interest Rate | Savings Accounts | Minimum Deposit | FSCS Protected | GMG Rating | More Info |
|---|---|---|---|---|---|---|
 | 4.85% | 17 | £1,000 | ✔️ | See Rates | |
 | 4.9% | 64 | £1 | ✔️ | See Rates | |
 | 4.65% | 1 | £1 | ✔️ | See Rates | |
 | 4.88% | 67 | £10,000 | ✔️ | See Rates |
You may also be interested in these other types of savings accounts:
