Banks will penalise "excessive" savings withdrawals

Many banks are likely to hit customers with penalties if they make too many withdrawals from instant savings accounts to pay off bills and debts, an industry expert has warned.

In order to manage their debts, many consumers are taking small, regular amounts of money out of their savings accounts to pay off creditors, Moneyfacts stated.

There are, however, limits to the number of withdrawals allowed from instant access savings accounts, and savers breaching those limits can incur penalties, said Michelle Slade, analyst at the financial information group.

She added: "If people are going to use it as a current account and dip in and out their money, the bank is not expecting you to do that sort of thing, so there is going be some sort of penalty if you are going to make an excessive number of withdrawals from your account."

Last year, research from Nationwide found that 54 per cent of consumers thought it essential that savings accounts require no advance notice of withdrawals.