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Cash ISAs : Buying Tactics
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Last update : April 2013
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- Most ISAs can be opened online, by post or in a bank or building society branch
- Applying online is usually the easiest way
- Must be 16 or over to qualify for a Cash ISA, no upper age limit
- Must have proof of ID and National Insurance number - See - What to do if you've lost your NI number
- For the current best deals see the Top 3 Cash ISAs - Updated every Monday
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| National Savings and Investments (NS&I) also offer ISAs |
| National Savings & Investments (NS&I) is a Government run and owned savings institution and is perhaps best know for selling Premium Bonds.
The NS&I also offers a few styles of Cash ISAs and they're worth checking out. But as ever look hard at the interest rate they offer because it can often be beaten by ISAs sold by the banks and building societies.
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| How to buy a Cash ISA |
| Traditionally ISAs were opened by filling out forms in a Bank or Building Society but now most can be opened online. Expect the opening process to take up to a week, although it should be instant if you already have an account with that bank/building society.
The two main rules for choosing the best Cash ISA are -
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- Go for the highest interest rate, alongside
- The most flexibility in regards to your financial situation
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| Higher interest rate is obvious, why earn 3% with the ABC bank when the XYZ bank pays 4%. |
| Flexibility is important as well |
| Flexibility with ISAs usually means instant access, so that you can withdraw your money whenever you choose. Some ISA accounts for example pay a higher interest rate but are Notice Accounts meaning you have to give 30 days, 90 days or even 180 days notice to access your money. Your money is in effect locked up.
Most people want instant access. However those with large cash savings are often happy to lock up part of their money for a certain period of time in order to earn a higher interest rate.
This is why it's important to look at your own financial situation in relation to the flexibility it needs.
If in doubt always seek flexibility even though it may mean accepting a lower interest rate. For example, I would prefer to accept a rate of 3% with instant access to my money rather than 4% but having to give 90 days notice to access it.
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| Cash ISA Buying Tactics - What To Look Out For |
| When choosing an ISA there are a few points to consider: |
| Access: |
| How do you want to operate the account?
By going into a branch, by post, over the telephone or via the Internet? Most of the banks and building societies offer access by all the above methods but some accounts are only Internet or branch based.
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| Transfers: |
| An ISA transfer is where you have a Cash ISA with one provider but want to transfer it to another.
For example, your ISA money might be earning 3% at present with the ABC bank but the XYZ bank is offering 4%. However, some institutions won't accept transfers into their ISA accounts from other ISAs, they will only accept new ISA money for that tax-year.
Also, some providers will penalise you for transferring out, perhaps paying no interest in the month when the money is transferred out.
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| Minimum Balance Requirements: |
| Many banks and building societies have a £1 minimum to open an account, although the better paying ones might require over £1000. |
| Withdrawals: |
| Check to see if there is a limit to the number of cash withdrawals that you can make before losing interest.
Most Cash ISA accounts are instant access but some, often the ones with the best interest rate, have penalty restrictions such as only 4 cash withdrawals allowed per year.
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| Bonus interest rates: |
| Some ISAs which on paper offer great rates of interest may include what they call a 'bonus rate'. This is an interest rate boost for a period of time but after that has expired savers often find the rate of interest is not so competitive.
For example, the XYZ bank offers their cash ISA at 6% but 3% of that is a bonus rate for 6 months. The way to handle these types of accounts is simple -
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- Only open them if the bonus rate is good and lasts for more than 6 months and preferably 12
- Only pay into these types of accounts if you're financially organised enough to switch the money when the bonus rate expires
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| Aged Based ISAs: |
| Some banks, but normally Building Societies, target a specific age group such as the over 55s or 60s. Often these deals can be attractive so be on the lookout for them if you fit the criteria.
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Current Cash ISA Deals
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Read more in the ISA section:
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| Looking for something? Then search this site: |
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