What Is a Savings Account Bonus Rate and How to Avoid the Trap
The Bonus Rate: A Double-Edged Offer
Bonus rate savings accounts offer a higher introductory interest rate — sometimes dramatically higher — for an initial period, typically 12 months. After the bonus period ends, the rate drops sharply to a much lower "revert" rate. Many savers miss this transition and continue earning far less than they expect.
How Bonus Rates Work
A typical bonus rate account might advertise 5% AER for 12 months — consisting of a base rate of 1.5% plus a 3.5% bonus that applies only in year one. After 12 months, the rate automatically falls to 1.5%. If you don't move your money, you're now earning well below the best available rates.
Why Banks Offer Bonus Rates
Banks use bonus rates to attract new deposits quickly — often to meet lending capital requirements or to capture market share. They know statistically that a significant proportion of customers won't switch when the bonus expires, effectively giving those customers a poor rate while the bank retains their deposits cheaply.
How to Avoid the Trap
- Set a calendar reminder for one month before your bonus expires — this gives time to find and open a better account before the rate drops
- Read the full terms when opening: what is the base rate after the bonus? When exactly does it expire?
- Check rates annually regardless — even non-bonus accounts' rates change as the Bank of England base rate moves
- Use a savings platform like Raisin or AJ Bell — these aggregate accounts from multiple providers and often send alerts when better rates become available
MoneySavingExpert's Savings Best Buys
Martin Lewis's MoneySavingExpert maintains a weekly-updated best buy table separating bonus rate accounts from genuine standard-rate accounts, making comparison straightforward. Bookmark it and check quarterly.
