Wednesday, 29 February 2012

Ten tips on surviving the cash ISA season.

With just over a month until the end of the tax year, it's that special time when banks and building societies remember that they sell cash ISAs, and hike the rates so they can secure that much valued top spot in the best buy tables. Sigh.

I know from the emails I receive that many people are reasonably cynical about the way a lot of the banks operate (and who can blame them?). But there's no point in having money sitting in your cash ISA earning next to nothing, or picking an account that's paying a paltry rate of interest. So, are my ten tips on getting a good deal:

1. Know your limits. This tax year (to April 5th) you can pay up to £5,340 into a cash ISA, which worked out at £445 a month. From April 6th you'll be able to pay in £5,640 into a cash ISA (or £470 a month).

2. Look at how much existing ISAs are earning. Many cash ISAs will accept transfers in, which means you can move some or all of the money you've saved in cash ISAs in previous tax years. If you have a cash ISA that you're currently paying into, you have to move all of it (or none at all).

3. Watch out for the bonus rates. Banks love bonus rates because they can pay an eye-catching rate during the ISA season and whisk it away after a year or so. Set up an alert to remind you to shop around when the bonus rate runs out.

4. Compare the comparison sites. Don't look at one comparison site alone because they often assess best buys in different ways: some don't give the top slot to ISAs that tie you to another account, others don't include bonuses that last for less than a year and some have exclusive deals that you have to take out via the site.

5. Look at fixed rate cash ISAs. If you're saving your ISA money for something longer term (i.e. you won't need your money within a year at least), find out how much more you could earn if you take out a fixed rate ISA. Some cash ISAs will let you get at your money before the fixed rate term is up as long as you give a couple of months' notice, but not all will.

6. Find out if you can top up your fixed rate cash ISA. Most fixed rate cash ISAs can't be topped up after a certain period (often 30 or 60 days), but some ISA providers will let you take out a second cash ISA to use up the rest of your allowance if you haven't already done so. If you think you'll have money to spare, check with the ISA provider first. Some will let you take out a fixed rate ISA, others a variable rate.

7. Split your ISA money. It doesn't necessarily have to be a choice between a fixed or a variable rate. Some ISA providers will let you split your money between two or more products they offer.

8. Think ethical. March is move your money month, a big campaign to encourage people to move away from mainstream high street banks to smaller building societies or ethical providers. There isn't much choice if you want an ethical current account but there are a number of ethical cash ISA providers (and as I write this, you'd earn £35 a year less in interest if you went with the best buy ethical cash ISA compared to the best buy non ethical ISA and invested the full allowance of £5,340).

9. Look at taxed accounts. If you're a basic rate taxpayer, look at whether you'd be better off putting your money into a taxable (i.e. ordinary savings) account rather than a cash ISA. Some banks pay better rates on taxable accounts (probably because they know that cash ISAs are so popular).

10. Understand the transfer rules. If you're transferring an ISA, the switch must be done directly from one ISA provider to another (you can normally download a 'transfer' form) - you mustn't close the account and pay the money into an ordinary bank account. You can transfer money you've saved in a cash ISA into a stocks and shares ISA and it won't affect your ISA allowance, but you can't do the transfer the other way round.


  1. Thanks for great information you write it very clean. I am very lucky to get this tips from you

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  2. This comment has been removed by the author.

  3. Great article! Will come in very handy when it comes back around to the end of the financial year and I've got to look at moving my ISAs again.

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