The standard things matter: return, risk, liquidity, diversification


Your return is the interest rate. For instant access cash you just look for the best interest rate you can. This will always be in an online account. If you want the benefits of a high street branch and a smiling face to answer your questions you'll have to pay for it - through lower interest rates.

You can keep switching accounts to find the best rates if you have the energy and nothing better to do with your time. Remember that every time you switch your balance will spend a few days in that strange banking limboland when you get no interest at all.

If you tie your money up for a fixed term you should expect extra interest for your loss of liquidity. To judge this you need to understand the yield curve.


Provided you have a balance of less than £85,000 in your account it is guaranteed by the government (under the UK's Financial Services Compensation Scheme - FSCS). So if your bank collapses it will cost you nothing but inconvenience. This will not apply to accounts outside the UK or deposits with non-banks anywhere.

If you have large amounts in cash spread it between several banks (diversification).


Make sure you understand any withdrawal restrictions on your account. Any restraint on your getting at your money is a cost (to you). If you tie your money up make sure you have properly evaluated the benefit of hanging loose.

A few other things....

  • Don’t be seduced (at least, only knowingly be seduced) by high interest rates that are really introductory offers.
  • Today's star can turn into tomorrow's dog. It's the marketing, stupid.
  • Make sure the FSCS applies to your account. Deposits with non-banks are outside the scheme, as are foreign banks and offshore accounts even with impeccable high-street names.
  • ......although foreign banks may be covered by their own country's compensation scheme.
  • If you have multiple accounts you have multiple coverage (£85,000 each bank). But there's a nasty wrinkle. The word 'bank' is interpreted as 'banking group' (more technically - banks covered by the same licence). So if you use two different banks for large sums you need to make sure they are not in the same license group.