How savings accounts work

Savings accounts provide a place for you to put your money aside - whether that’s in a lump sum, or to gradually grow your savings.

You might be looking to save for something specific like a home deposit, a car, a holiday or retirement. Or maybe it’s to build a safety net so you have money set aside for whenever you might need it.

There are various types of savings accounts, with different rates, terms and restrictions. Whichever type you choose, you’ll earn money on your savings based on your account's interest rate.

Types of savings accounts

Most savings accounts fall into three main groups based on how easily you can add or withdraw money.

Instant access savings accounts

These accounts let you pay in and take out money whenever you need to and are sometimes called easy access accounts. These accounts could be good if:

you want flexibility
you may need to dip into your savings for things like emergencies
you’re starting to build good savings habits

At Tesco Bank, we offer a range of instant access accounts.

Fixed rate savings accounts

Accounts that typically allow you to deposit within the first 30 days of opening the account. Different providers will offer different fixed rate periods and the interest rate will remain fixed for the duration of that time. These accounts could be good if:

you’re saving for a longer term and won’t need the money for a while
you want a guaranteed interest rate

We offer fixed rate accounts across several fixed terms at Tesco Bank.

Restricted access savings accounts

Providers may offer accounts with restrictions on the number of withdrawals or deposits that can be made, or the amount that can be deposited or withdrawn. With these types of accounts, the interest rate may change depending on the restrictions being met. We don’t currently offer Tesco Bank restricted access accounts.

Compare our range of Savings Accounts

ISAs vs savings accounts

What's the difference?

An ISA (individual savings account) is a type of savings account that lets you save tax-free. This is because the interest earned from an ISA won’t contribute to your Personal Savings Allowance.

This doesn’t necessarily mean you’ll pay tax on the interest earned in a regular savings account, it depends if the amount of interest you earn exceeds your Personal Savings Allowance in the tax year.

The amount you can save each tax year is known as your ISA limit. You can pay in up to the current limit of £20,000 across all ‘adult’ ISA accounts you may have combined (Cash ISA, Stocks and Shares ISA, Innovative finance ISA, Lifetime ISA). In addition, you can save up to £9,000 across all Junior ISA accounts held in your child’s name.

Whilst you can only save up to the ISA limits per tax year, there’s no limit to how much money can be held in an ISA. You might hold more than the limit in your ISA if:

you build on your ISA savings each year and the total account balance grows to more than £20,000 (or £9,000 for a Junior ISA)
you can transfer funds that you’ve saved in previous tax years from other ISA accounts you hold - as long as you follow the official ISA Transfer Process the transferred funds won’t count towards your ISA limit for the current tax year

Like other savings accounts, there are usually different types of Cash ISAs available. These can include: instant-access, limited access or fixed-rate.

How ISAs work

Learn about the different types of ISAs and how they work

Compare at a glance

Compare ISAs and savings account at a glance
Feature	ISAs	Savings account
What type of access can I get with a savings account?	You have a choice of: instant access, limited access or fixed rate.	You have a choice of: instant access, restricted access or fixed rate.
Will I pay tax on my savings interest?	Interest you earn is tax-free, which may be helpful if you’re building your balance over several years.	Interest you earn may be taxable, it depends if the amount of interest you earn exceeds your Personal Savings Allowance.
How much can I deposit into a savings account?	You can only deposit up to the annual ISA limit. This is £20,000 for an adult ISA and £9,000 for a Junior ISA.	You have flexibility as there is usually no annual limit on how much you can save.
Can I have more than one savings account?	You can have and pay into multiple Cash ISAs in the same tax-year.	You can have multiple savings accounts, making it easier to work to manage different goals at the same time.
Can I have a joint savings account?	You cannot open a joint ISA with another person.	You can open a joint savings account with another person allowing you to work towards shared financial goals.

Things to consider before opening a savings account

Before choosing a savings account, think about how you’re going to use it. Ask yourself whether you’ll need fast access to your money, whether a fixed or variable interest rate suits you better, and whether any limits or fees might affect how you save. It’s also worth thinking about the tax you might pay on interest, depending on your Personal Savings Allowance.

Choosing the right savings account

If you want flexible access, an instant access account could be a strong option. For long‑term saving, a fixed rate account could work well. And if you want to grow your money tax‑free, a Cash ISA might work better. Remember many people choose to have more than one type of account to stay ready for both everyday needs and future plans.

To compare savings accounts and see which one suits your goals, you can explore the full range of Tesco Bank savings accounts on our comparison page.

Savings account types explained