What is a cash ISA?
- A cash ISA is a savings ISA (as opposed to an investment ISA).
- Similar to a savings account but allows interest to grow tax-free.
- Generally considered a safe place for your money.
How do cash ISAs work?
- You can contribute to the limit of £20,000 per year.
- Anyone over 16 can open their own cash ISA.
- Interest rates tend to be lower than most other ISA types, but they are the most secure.
Cash ISA rules
- Can pay all £20,000 into a cash ISA or split them between the various ISA types.
- Withdrawal depends on whether you have an easy access or fixed term ISA.
- Once you have withdrawn money, you cannot top up your ISA again if you’ve already paid the full amount.
- The only exception to this is if you hold a flexible ISA.
Cash ISA interest rates
- Cash ISA rates are often lower than other ISA types, as they are less volatile places for your money.
- Rates can be under 1% for instant access cash ISAs and up to around 2% for long-term fixed-term ISAs.
- The cash ISA market is very competitive, rates are not the only thing to consider.
- Some providers pay monthly and some annually.
Types of cash ISA
Fixed rate ISA:
- As the name suggests, these cash ISAs have fixed interest rates throughout the term of the ISA.
- To access the fixed interest rates most providers prevent you from withdrawing for a set period.
- This often means fixed rate ISAs have better interest rates.
Instant access ISA:
- Allow you to access money instantly/much quicker than fixed rate/term.
- Also known as easy access ISAs.