The best of the supermarket online savings accounts offers an impressive 6.25% rate that’s streets ahead of its rivals.
But be warned, there is a nasty sting in the tail with the ASDA Internet Savings Account that means you could be better off putting your money elsewhere. In our second article on how the supermarket’s various financial products compare, we take a look at online saving accounts.
Of the other online saving accounts offered by supermarkets, Sainsbury’s comes in second with a 6% rate, while Tesco comes in third with its uncompetitive 5.75% offering.
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The ASDA account is no good in Year Two
If you put away £10,000 in ASDA’s account, you would earn £625 interest before tax in the first year. Invest the same amount with Sainsbury’s and you would earn £600, while Tesco’s account would pay out £575.
So on the face of it ASDA’s account seems like the best offer. But leave the money untouched for a second year, and the ASDA account will earn £550 interest, while the Sainsbury’s account earns £600.
Why does the ASDA account suddenly become less competitive? It all comes down to a marketing gimmick whereby the interest rate falls by 0.75% after the first year, meaning it only pays 5.50% thereafter. Incidentally the Tesco account has a similar gimmick, with its rate also falling to 5.50% after year one.
The Sainsbury account remains the same throughout however, making it a far better place for your savings in the long run.
See our best buy saving accounts
Could go from bad to worse?
And the gap between the accounts could widen further still. As you may have read, the Bank of England recently cut the base rate by 0.25% to 5.50%.
Sainsbury’s and Tesco have already responded by cutting their saving account rates by a similar amount. ASDA has also cut the underlying rate it pays by the same amount, though it has tried to disguise the fact by increasing the bonus it pays in the first year.
However your money will still only be earning interest at 5.50% after year one – the same as Tesco’s poor offering.
And when you include the fact that ASDA’s account has a £100 minimum investment limit while Tesco has no such restriction, it means the account the looks the best right now could actually be the worst in 12 months time.
Compare instant access accounts here
Better savings elsewhere
Of course this article looks exclusively at supermarket products. If you are in the market for an online saving account, you will find far higher rates on offer elsewhere.
The best accounts that won’t fall after year one are Newcastle Building Society’s Net Saver (6.43%) and ICICI’s HiSave account (6.41%).
| Product | AER in Year One | AER in Year Two |
| ASDA Internet Saving | 6.25% | 5.50% |
| Sainsbury's Internet Saver | 6.00% | 6.00% |
| Tesco Internet Saver | 5.75% | 5.50% |
| Newcastle BS Net Saver | 6.43% | 6.43% |
| ICICI Hi Save | 6.41% | 6.41% |
Compare instant access accounts here
