An instant access cash ISA is simply a tax free savings account that allows you to access your money whenever you please. Here's how to find the account that's right for your savings.
Instant access Cash ISAs are the simplest and most widely used type of cash ISA and, unlike fixed rate ISAs where the cash must remain in the account for a fixed timeframe, you are free to withdraw the funds anytime you choose at little or no charge.
The downside is that the interest rates do tend to be slightly lower in general than fixed rate cash ISAs but, providing you choose the best easy access cash ISA you can find and keep an eye on the interest rate, you’ll still be able to secure a good return – particularly as you won’t pay any tax on the interest you earn.
Anyone aged 16 years and over can open an instant access cash ISA and for the 2013/2014 tax year, the maximum amount you can save in instant access cash ISAs is £5,760 (up from £5,640 in 2012/13).
Instant access cash ISA rates vary between ISA providers. If you are looking for the best instant access cash ISAs, it follows that the providers offering easy access cash ISA best rates should be at the top of your list. But be prepared to earn less interest than you would if your money was in a fixed rate cash ISA. ISA providers must factor the ‘risk’ of discretionary withdrawal hence the lower interest rate available on cash instant access cash ISAs.
The interest you earn does not necessarily have to be paid into your instant access cash ISA account. Some providers give you the option of having interest paid into a current account or any other account you specify with the only limit often being that the account is also held in the same institution.
When you compare instant access cash ISAs you’ll need to check the details of each carefully. Some ISA providers may quote an attractive rate for their instant access cash ISAs. But on further scrutiny, you may find that the rate includes a ‘bonus’ interest only applicable to the first year. While this is fine as it does give you some reassurance of the minimum that your money will be earning, it does mean that you’ll need to move your money to a different home after 12 months – although this is often necessary regardless of any bonus.
Remember that the interest rate paid on instant access cash ISAs is almost always variable – even when there’s a bonus. So, to ensure you continue to benefit from the best rates you should carry out an instant access cash ISA comparison on a regular basis to see how your account compares to the others currently available. The benefit of an instant access cash ISA is that you can move your money to a different account whenever you choose.
Not all ISA providers will allow you to transfer money held in other cash ISAs to the instant access cash ISA you have opened with them. If this is something you want to do then you’ll need to choose a cash ISA that explicitly allows transfers in – this is something you can check in our Cash ISA comparison table.