The age of digital banking is upon us, meaning itís easier than ever before to set up a savings account and compare the best rates around. Hereís how to make the most of online Cash ISAs.
Banks and building societies are allowing more and more of their products to be made available on the internet, meaning you can open accounts from literally anywhere you like.
This means it’s easier than ever to make the most of savings accounts and online ISAs to make your money work harder.
Here’s how you can make an online Cash ISA comparison and find the best home for your cash.
Why save with a Cash ISA?
What makes Cash ISAs a handy and popular choice for both new and experienced savers alike is how simple they are to set up without a lot of financial knowhow, while still offering market-leading interest rates.
The fact they allow you to keep some of your hard-earned savings out of the taxman’s pocket is also an appealing aspect.
It’s important to remember that there’s a limit to how much you can invest in online Cash ISAs during each tax year, but the silver lining is that you can set another up when the new tax year comes around.
If you’re canny and make the most of your new allowance each time, after a few years you could be in a saver’s paradise.
Picking the best online Cash ISA
When you start to compare online Cash ISA deals there are a number of things you need to think about to ensure you get a good one.
How much can you deposit?
It sounds obvious, but you must be sure that you can afford to be without your cash for the duration of the ISA because access can often be restricted.
If you’ve saved up the money specifically to invest it in the best online ISA then you might happy to do without it for a while.
If you want to earn some interest on your savings but are unsure about how much you can afford to invest, only deposit an amount that you are sure you won’t need – because you might not see it again until the account matures.
If flexibility is an issue, there are instant access Cash ISAs that allow you to get your money back at short notice. Be sure to check the conditions carefully and bear in mind that once a withdrawal has been made, you can’t deposit your cash in another ISA in the same tax year.
With online ISA rates you can see and compare clearly what each bank or building society provides and see which one is offering the best potential return on your money.
The best online ISA accounts should compete well with interest offered by fixed bonds and regular savers, meaning if you can use your entire allowance you should be sure of making a decent profit – especially if the rates are fixed, meaning you won’t lose out if general rates drop.
Variable rates broadly follow the Bank of England base rate, meaning if they rise you feel the benefit – but if they fall you may only earn peanuts on your invested cash.
Online Cash ISA terms and access
During your search for the best internet ISA you need to think about how long you want to lock it away for, which can directly affect the interest you earn.
If you choose a short term for your Cash ISA – a year or two – you will get your money back quicker, but the interest rate won’t be as high as it could be.
Picking a longer term deal of three or more years will allow you to get better interest rates – and so get more money at the end – but will mean you won’t be able to get at it if you need it.
The amount of access of you are allowed will vary, depending on which of the best Cash ISA online offerings you choose.
Some position themselves as flexible, but what this means is that if you take out cash early you will have interest deducted.
Others may allow you to take out money without being penalised, but not let you put any back in to replace it during the same tax year in line with general ISA rules.
If you choose an instant access online Cash ISA you again have a certain amount of flexibility, but the interest rate offered could be pretty low compared to what else is available.
Bonus payments and online Cash ISA transfers
Certain Cash ISAs might offer bonus payments or interest on your money to draw you in. These will generally be introductory offers that last for 12 months.
If you pick one of these check the conditions of the offer carefully – as normally after the initial bonus period has ended the interest offered could drop dramatically.
It’s also worth checking if your chosen online ISA provider will allow transfers to be made in or out.
If interest rates on your account drop and you suddenly find you’re earning a lot less on your cash, you may be able to shift it into a new account that’s offering a better deal and feel the benefits. For more about the benefits of doing this, you should check our guide How to transfer your Cash ISA.