Barclays Dream Savings Account Review
The Barclays Dream Savings account is an unusual savings account designed to help people work towards their financial dreams. Barclays helps encourage account holders to keep saving by rewarding regular deposits and leaving money in the account.
One unusual feature of the account is that you’re limited to depositing no more than $1,000 each month. This limit is intended to encourage slow and steady saving. Some of the account’s other feature include:
- Earn a highly competitive interest rate
- No fees or minimum deposits required
- Get bonus interest with consistent deposits and no withdrawals
- Works towards goals with the Dream Assistant
- Save for multiple dreams with multiple accounts
If you’re looking for the right savings account, this review will tell you everything you need to know about the Barclays Dream Savings account.
Get an Interest Bonus for Disciplined Saving
The Barclays Dream Savings Account offers two bonus earning opportunities. If you meet either of the requirements, you’ll get a 2.5% bonus on all the interest you’ve earned in the past six months. If you meet both requirements, you’ll get a 5% bonus. That can help you make quick progress towards your goals.
The requirements to earn the bonuses are:
- Make a deposit every month for six consecutive months
- Make no withdrawals for six consecutive months
By offering these bonuses, Barclays encourages you to keep your sight set on your end goal. Taking advantage of the bonuses makes the account’s already great interest rate even better.
Note that this is not a limited-time bank bonus, it is an ongoing feature of this account.
Create a Savings Plan Using the Dream Assistant
Barclays Dream Assistant helps you create a savings plan that will help you reach your goal.
You start by selecting your goal, whether it's saving for a car, a down payment on a home, or something else. Enter how much you want to save, then, enter how much you already have saved towards the goal. Finally, enter how much money you’re able to save each month.
The Dream Assistant will take the information you’ve entered and automatically tell you how long you have left until you reach your goal. This tool can help you make more solid plans for your financial future.
Save for Multiple Goals with Multiple Dream Accounts
If you have more than one financial dream, you can open more than one Dream account (up to 3). While it might seem counter-intuitive to open more than one account, the way the Dream account is structured makes it very useful to do.
You’re allowed to open three separate dream accounts, giving you the chance to save for three different goals at once. Each account has its own $1,000 per month deposit limit. Each account also tracks your progress towards earning an interest rate bonus individually. Making a withdrawal from one account won’t stop you from earning a bonus on the other accounts.
If one of your goals will take 8 months to reach, and another will take 13 months, it makes sense to open two accounts. If you pooled the money in one account, withdrawing some after eight months to pay for your first purchase, you’d pass up on the chance to earn an interest rate bonus.
Opening multiple Dream accounts lets you track each goal individually and take full advantage of the extra earning opportunities.
Your Money is Safe
There are two things that you should be looking for when you are choosing which savings account to open. Those two things are whether your money will be safe in the account and how much interest you can earn. This account has both covered.
The Barclays Dream Savings Account is safe thanks to its insurance from the Federal Deposit Insurance Corporation. The FDIC was founded in the wake of the Great Depression to help prevent a similar event from occurring ever again. Its goal is to offer consumers assurance that the money they deposit in a bank is safe.
The FDIC does this by insuring each account at covered banks, up to a limit of $250,000 per account. If you have an account at an insured bank and the bank closes or runs out of money, the FDIC will reimburse you. Thanks to that protection, you cannot lose money deposited in the Barclays Dream Savings Account.
Losing money, and having your money lose value are two different things. It is still possible for the money in your account to lose value in spite of the FDIC protection. This is because of the effects of inflation.
How Interest Can Counteract Inflation
Inflation is a process that causes money to become worth less over time. If you’ve noticed products getting more expensive, or companies selling smaller products for the same price, you’ve seen the effects of inflation first hand.
When people talk about inflation, they refer to it as a percentage rate per year. So, if the inflation rate this year is 2%, and you had $1 on January 1st, that same dollar is worth 98 cents on December 31st. To look at it another way, if something cost $1 on January 1st, it’ll cost $1.02 on December 31st.
While such a small change might be barely noticeable, it can have a huge effect over the course of a few years. If the rate of inflation is 2% per year for 10 years, something that cost $1 at the start of the decade will cost $1.22 at the end. At the end of 20 years, it will cost $1.49, almost 50% more.
Inflation is complicated. To put it simply, things cost more as time goes by. If in ten years or more you want your savings account to still be able to buy the same things it can buy now, aim to earn an interest rate similar to the inflation rate. If the interest rate is higher than the inflation rate, your account will be gaining value. That means you’ll be able to buy more in the future than you could today. If the interest rate is lower than the inflation rate, your account is losing value. That means you won’t be able to buy as much in the future.
Why Banks Pay Interest and How the Rate is Determined
So why do banks pay interest at all? It’s because what you’re really doing when you make a deposit is lending money to the bank. The bank will take your deposit and pool it with the deposits that other account holders have made. It will then use that money to offer loans to its customers.
The bank offers car loans, mortgages, credit cards, and other types of loans. It charges the borrowers interest and pays some of that interest to you. The difference is kept by the bank to pay for employee’s salaries, equipment, and other operating costs.
Running a bank is expensive, but online banks have a distinct advantage when it comes to costs. Because they don’t have to operate costly physical branches, they are much cheaper to run. That lets online banks offer much better interest rates than physical banks. As an online bank Barclays lives up to that reputation, offering a highly competitive interest rate. If you meet requirements, you can even earn an interest bonus, pushing the effective rate even higher.
Monthly Fees and Minimums
Because the Barclays Dream Savings Account is designed to help people reach their goals savings, Barclays makes it easy to open an account. There is no minimum deposit requirement, but there is a maximum initial deposit. You are restricted to depositing no more than $1,000 when you open the account. You are also forbidden from depositing more than $1,000 each month. This encourages slow and steady savings towards goals.
An added bonus is that there is no monthly maintenance fee to worry about. Unlike other accounts that make you jump through hoops to waive a fee, you’ll never pay a fee, even if you leave the account dormant for a few months.
Though the goal of the Dream Savings Account is to avoid using the money until you’ve reached your goal, sometimes you’ll need to make a withdrawal. That’s where you might run into the main fee charged by the account: the excessive transaction fee.
Federal law limits the number of transactions, like withdrawals, that can be made on savings accounts. Each statement cycle, you are limited to six transactions. You’ll pay a $5 per transaction for every transaction after the sixth.
If you’re the type who likes to transfer money or withdraw money from your savings account, you might want to choose a different account.
Barclay Dream Savings Account Fees
|Monthly Maintenance Fee||$0|
|Excess pre-authorized withdrawals, transfers or checks||$15 each|
|Statements with check copies &/or deposit slips only||$0.50/Statement|
|Stop Payment Fee||$0|
How Does It Compare?
The savings account is the second most popular bank account in the US, so there are lots of options to choose from.
When comparing accounts, make sure to compare interest and fees first, since they directly affect the money in the account. Also look out for the following factors:
- ATM access
- Sign-up bonuses
- Online and mobile banking features
The Final Verdict
The Barclays Dream Savings account is unique account designed specifically for saving towards goals. If you have a goal you’re working towards, it’s a great choice thanks to its great interest rates and unique structure. If you want a more general purpose savings account for something like an emergency fund, choose a different account.