15 top cash ISAs

If you're looking for a new tax-free home for your savings, take a look at 15 of the best cash ISAs in town...

No one can blame savers for feeling a little fed up at the moment. After all, interest rates on savings accounts are hardly anything to get excited about. However, as I explained last week, savings rates are now at their highest levels in two years. So at least things are looking slightly more promising.

With savings rates going up, there’s even more reason to save in a cash ISA. And that’s because your savings are tax-free. As a result, the taxman can’t get his grubby mitts all over your hard-earned cash.

ISA season is well and truly over until next year, but that’s no excuse for not looking for a new home for your tax-free savings. Don’t forget, you can now invest a total of £5,340 in a cash ISA each tax year, so it really is worth taking advantage of.

Here, I’m going to take a look at some of the best cash ISAs on the market.

The top easy access cash ISAs

If you’d like to be able to get access to your savings should you need to, here are the top easy access cash ISAs:

Provider and account	Interest rate	Minimum deposit	Transfers in?	Need to know	Access
AA Internet Access ISA	3.35%	£500	No	Rate includes 1.65% bonus for 12 months.	Online
Santander Flexible ISA	3.3%	£1	No	Rate includes 2.8% bonus for 12 months.	Online, phone, branch
Halifax ISA Direct Reward	3.2%	£1	Yes	Rate drops to 3% if not a current account holder. Rate falls to 0.5% after 12 months.	Online, phone
KRBS Easy Access Cash ISA	3.01%	£1	Yes	Rate includes 2.5% bonus for 12 months.	Branch, post
ING Direct Cash ISA	3%	£1	No	Rate guaranteed for 12 months, then falls to 1%.	Online, phone

As you can see, the very best paying cash ISA out there is the AA Internet Access ISA which pays 3.35%. However, the one problem with this is that it doesn’t allow transfers in. This means that if you already have a cash ISA and you’re looking to move that money across to an ISA with a better interest rate, you won’t be able to transfer your money into the AA Internet Access ISA.

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The best paying cash ISA that does allow transfers in is the Halifax ISA Direct Reward which offers an interest rate of 3.2% if you’re a Halifax current account customer. If you’re not a current account customer, the rate falls to 3%, although this is still pretty competitive.

Just be warned that after one year, the rate will fall to 0.5%, so you will need to move your savings elsewhere.

Of course, this is nothing unusual because all of the above cash ISAs include bonus rates or overall rates that drop after one year. So once that bonus period is up, you will need to move your funds to a more competitive account.

I should also point out that the advantage of the ING Direct Cash ISA is that unlike all of the other accounts which have variable rates of interest, its rate is fixed for 12 months. So you can be reassured that the rate won’t fall below 3% for 12 months.

The top fixed rate cash ISAs

If you’re happy to lock up your funds for a year or more, you could opt for a fixed rate cash ISA instead. The table below highlights some of the most competitive ones out there.

Provider and account	Interest rate	Term	Minimum deposit	Transfers in?	Access
Aldermore 1 Year Fixed Rate ISA	3.33%	1 year	£1,000	Yes	Online, phone, branch
Barnsley BS Online Fixed Rate ISA	3.3%	Until 31.08.12	£100	Yes	Online
Bank of Cyprus Fixed Rate Cash ISA	3.7%	2 years	£1	Yes	Online, phone, branch, post
Chelsea BS Fixed Rate e-ISA	3.7%	Until 31.07.13	£100	Yes	Online
Bank of Cyprus Fixed Rate Cash ISA	4.25%	3 years	£1	Yes	Online, phone, branch, post
KRBS Flexible Fixed Rate ISA	4%	3 years	£100	Yes	Branch, post
Halifax Fixed Rate ISA Saver	4.4%	4 years	£500	Yes	Online, phone, branch
Northern Rock Fixed Rate E-ISA	4.26%	Until 24.07.14	£1	Yes	Online
BM Savings 5 Year Fixed Rate ISA	4.65%	5 years	£500	Yes	Post
Halifax Fixed Rate ISA Saver	4.4%	5 years	£500	Yes	Online, phone, branch

Sadly, you won’t actually earn a higher rate of interest by locking up your funds for one year. After all, the top paying one year cash ISA – the Aldermore 1 Year Fixed Rate ISA - pays 3.3%, so slightly below the rate offered by the AA Internet Access ISA. However, on the plus side, all of the fixed rate cash ISAs above allow transfers in – so if you do have an existing cash ISA and you’re looking to move your money elsewhere, you may be better off opting for a fixed rate ISA.

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If you decide to tie up your money for two years or longer, the good news is you’ll get a better interest rate. And don’t forget, these interest rates are fixed – so you won’t have to worry about the rates dropping during the term of the bond. But you will, of course, need to move your savings elsewhere once the term has come to an end.

Just be warned that you won’t be able to get your hands on your money for the term of the cash ISA, so if you think you might need access to your savings, a fixed rate cash ISA is not for you.

I’d also be a little hesitant about tying up my money for too long. After all, if you’re locked into a four or five year cash ISA and interest rates rise next year, you may find that your cash ISA is no longer competitive.

More: Get a cracking cash ISA | The biggest way you’re losing money | Why we don’t need banks