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Cash Isas – where is the best rate?

cash isa confusionVirgin Money emailed me last week to tell me my cash Isa was maturing. They’ve paid me a not-that-exciting 1.3% on my £5,000 over the past year. I decided it was time to look around for something better.

One option was to stay with Virgin and transfer into a follow-on cash Isa. The suggested product was a two-year fix paying 1.61%. That’s an upgrade, of sorts, but not that interesting. So I headed over to Moneyfacts to see if there was anything better.

The Moneyfacts site is a bit confusing at first. You have to sort out the sponsored products from the best buys. Also, some of the cash Isas have a minimum deposit, ranging from £1 to £20,000, so not all accounts are available. Shame - it’s often the case that you get a slightly better interest rate if you have a larger sum to deposit. And if you’re prepared to lock the money away for a couple of years, the rate can be more generous too.

You can also find top buy tables for cash Isas on comparison sites such as comparethemarket*  and MoneySuperMarket*.

To be honest, putting cash away for just one year is a bit of an administrative headache. It seems that no sooner have you set up a new account with new passwords to remember than it’s time to move on. For that reason, a two-year deal seemed to be an easier option.

Heading the top of the table in that category were the so-called challenger banks. These tend to be internet-only organisations but they’re properly licensed and signed up to the Financial Services Compensation Scheme which protects your money. Charter Savings Bank could offer me 1.95% and Shawbrook 1.91% for two years. (The minimum deposit for these is £5,000 and £1,000 respectively.) Coventry and Kent Reliance building societies could do 1.90% over the same time on £1 and £1,000.

I was all ready to hit go when I thought about the tedium of plugging in my details to a new bank. It really put me off. I had another look at Virgin and saw there was a three-year deal for 1.81%. That didn’t seem so bad in comparison. I would be locked in for an extra year but with my adversion to admin, maybe that was actually a good thing. Then I did the figures. At top-payer Charter, I would get £97.50 every year on 1.95%. At Virgin, I would get £90.50 on 1.81%. Over two years, that’s a £15 difference.

I’m sorry to confess that the extra £15 wasn’t enough to compensate for all the hassle of swopping. It was so much simpler to click on the Virgin option and stick with the same passwords for another three years. My finances would be in much better shape if I wasn’t so lazy. But I’m sure I’m not the only saver with this problem!

See our SMM guide to cash savings for more help. 

 

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Friday, 19 April 2019