Could these savings terms be costing you money?

With so many financial terms to get to grips with, opening a savings account can initially feel like learning a new language. But understanding the technical lingo is critical to savings success.

Not knowing what AER means, for example, could make a big difference to your total returns. Yet our survey of 1,182 Which? members in November found significant gaps in savers' knowledge of several important terms.

Here, we explain the key terms members struggled to get to grips with the most – and why it matters to your savings.

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If you found yourself stumped on any of these questions, you're not alone. These are the savings terms members told us they find hardest to get to grips with — and why understanding them matters.

1. AER and gross

The first two terms you're likely to come across when shopping around for a savings account are AER and gross. 

Providers use these to describe how interest is calculated and paid. Yet our survey found 20% of members who have opened a savings account or cash Isa don't understand AER well.

Gross is best understood as the flat rate of interest that's actually paid before any taxes or fees are deducted, while the AER (Annual Equivalent Rate) takes into account the effect of compounding – the snowball effect of income earned from interest growing together with your original investment.

Why does it matter?

When you open an account, you might be given the choice between having the interest paid either into your nominated current account or added to existing funds in your nest egg. 

Choosing the first option is useful if you need regular cash, but you won't benefit from compounding and you'll need to use the lower gross rate to tot up how much interest you stand to make. 

If you don’t need the income, letting interest roll up within your account can make a noticeable difference to your returns over the long term. To calculate the annual interest earned as a result of doing this, you'll need to use the AER rate.

For example, let's say you open Kent Reliance's market-leading instant-access account with a lump sum of £5,000. 

It pays 4.12% AER but if you choose to have returns paid monthly into your current account offering no interest, you'll be paid a gross rate of 4.04%. Assuming you don't make any further deposits or withdrawals, you'd earn £202 in interest after a year, compared to £206 with compounding.

• Find out more: best savings rates 2025

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2. Savings platform

We found 32% of members didn't have a good understanding of what a savings platform is. But these websites are handy if you don't like the job of shopping around for the best deal. 

They work with a number of banks and building societies to help source market-leading accounts for you. 

Registering with a savings platform is generally very straightforward and you'll usually be notified when any bonds are due to mature.

Why does it matter?

Some top-rated products are exclusive to the savings platform and can't be found anywhere else. For example, UBL UK's top three and four-year fixed rates of 4.21% and 4.26% are only available via Raisin UK.

Using a savings platform may sound like an easy win for time-poor savers who don't want to miss out on the latest rate, but don't rush into registering with a provider before you have weighed up the pros and cons of using the service.

Savings platforms make it easier to compare the best rates and manage multiple accounts in one place. However, some charge a fee for their services and, because they work with a set number of banks and building societies, you could easily miss a top rate offered by a provider not listed on the website.

• Find out more: what is a savings platform?

3. Bonus rate

Sometimes, the interest rate advertised on a savings account includes a temporary ‘bonus’ that lasts for a fixed period. Once the bonus ends, the rate drops to the account’s standard level.  

For example, Chase's Saver with Boosted Rate offers 4.5% AER, but that includes a bonus rate of 2.25%, fixed for 12 months. Once the year is up, you'll only get the standard rate, which is currently set at 2.25% AER. 

Similarly, Cahoot's chart-topping 5% Sunny Day Saver has a shelf-life of just one year, after which the money is automatically transferred to another of the provider's savings accounts paying a paltry 1% AER. 

Why does it matter?

Bonus rate savings accounts offer very attractive initial returns, but before rushing to snap up one of these deals, there are a couple of things to bear in mind.

Firstly, because the opening rate is temporary, if you don't pay attention and switch as soon as the introductory offer ends, you could find yourself earning a much lower rate than you'd get on a different account. 

The overall rate you get on your boosted saver isn't set in stone either. It could still go up or down before the bonus is due to end. That's because rates on instant-access accounts are variable and the provider can change them whenever it wants.

• Find out more: types of savings accounts

4. Notice account

Seven out of 10 of the top variable-rate deals are notice accounts, according to Moneyfacts data on 14 January 2026. Yet 14% of savers we surveyed admit they don't understand them well. 

Like instant-access products, notice savings accounts have variable-rates. But they differ in one crucial way – instead of being able to withdraw your money when it suits you, you'll have to tell your provider in advance that you want to take cash out. 

For some accounts, you'll need to inform the bank as much as six months ahead of time. For example, Earl Shilton Building Society's product offers 4.5% AER but it has a notice period of 180 days.

Why does it matter?

These accounts are unlikely to suit you if you may need to get at your savings unexpectedly. If you do make an emergency withdrawal from a notice savings account, you're likely to lose some interest.

5. Personal savings allowance

The personal savings allowance (PSA) is how much you can earn before facing a bill from HMRC, and 10% of members told us they don't have a good understanding of the term.

A basic-rate taxpayer can make up to £1,000 a year in savings interest tax-free, while higher-rate taxpayers get a £500 limit. Additional-rate taxpayers have no personal savings allowance.

Why does it matter?

If you have a large sum invested in a top-rate account, you could easily find yourself earning enough interest to push you over your PSA threshold.

For example, let's say you open the best one-year fix from Marcus by Goldman Sachs, paying 4.55% AER. A basic-rate taxpayer would only need a pot worth £21,978 to break their annual PSA. Higher-rate taxpayers will face a tax bill with £10,989 saved.

From 2027, income tax on savings interest will increase by two percentage points for both basic and higher-rate taxpayers. Plus, a freeze on income tax thresholds until 2031 means more people will find themselves pushed into higher tax bands. 

The best way to avoid a bill from HMRC is to open an Isa. They allow you to save up to £20,000 tax-free every year, and adults can choose four types of products – the cash Isa, stocks and shares Isa, innovative finance Isa and the lifetime Isa.

The most popular product is the cash Isa, which works in much the same way as a traditional savings account. 

Bear in mind, however, that from April 2027 the amount you can hold in cash will fall to £12,000 for savers under 65. To use the full £20,000 Isa allowance, the remaining £8,000 would need to be invested in a stocks and shares Isa. 

• Find out more: tax on savings interest

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Expert view

'Read the small print and look beyond the rate'

'When choosing where to put your savings, make sure you compare accounts from a range of different providers and not just the headline rate. 

'Part of your research should include reading the terms and conditions, checking for any important catches that might impact your overall returns or ability to manage your savings pot – for example, withdrawal limits or any opening restrictions.

'Still, our survey found only 17% of members read all the small print before opening a savings account or cash Isa. And 44% only skimmed the T&Cs.

'Our expert guides to the best savings account and cash Isa help you make an informed choice, while also flagging any important caveats to watch out for. 

'You can also check our reviews to see how providers measure up for customer service, and find out which ones meet the standards to become a Which? Recommended Provider.'