How to pick the right cash ISA for you

Whatever type of saver you are there's a cash ISA out there that's perfect for you. But hurry because the end of tax year deadline is approaching - fast!

Savvy savers always see cash ISAs as their first port of call. That's because, with a cash ISAs, you earn interest on your savings without having to hand over a single penny to the taxman. Hurrah!

Every tax year, you can to save up to £3,600 in one of these tax-free cash havens. Tax years run from April 6 in one year to April 5 the next, so there are now only a few days left before the deadline. Any allowance you haven't used by this date will be lost forever!

So, with time running out, how do you pick the best cash ISA? Well, it all depends on what type of saver you are. And luckily, for each type of saver there's an ISA that fits the bill. I've also included a special warning with each which highlights important facts you need to know. Let's take a look:

Type 1 - The 'hands on' saver

Does this sound familiar? You like to be able to put away as much money as possible, even if it's only a small amount. But you also need to get your hands on your cash if an emergency strikes.

If so, what you need is an easy access cash ISA.

There are plenty available, but the best buy today is the Barclays Golden ISA which pays a top rate of 3.61% AER, including a 1% bonus for a year.

The rate might not sound all that impressive, but remember it's tax-free. If you put your savings in a normal savings account, you would need a rate of 4.51% if you're a basic rate taxpayer - or 6.01% if you're a higher rate taxpayer - to get the same return as the Barclays Golden ISA after tax.

Another competitive choice is the NatWest Cash ISA Plus which pays a decent rate of 3.51%. But to qualify for this account you'll also need to open a NatWest current account or instant access savings account (unless you're already an existing customer).

On the plus side, if you're an existing Advantage Gold or Advantage Private Account holder and you open a Cash ISA Plus before 20 April 2009, you'll enjoy an extra bonus for 12 months which increases the rate to 4.02%.  

Warning: Don't forget any money you withdraw from your ISA can't be replaced. If you deposit the full £3,600 and then withdraw some of it, you won't be able to make any further deposits until a new allowance is available the following tax year - even if all you want to do is replace the money you originally withdrew.

So, always think carefully before you make a withdrawal from an ISA. After all, it's best to keep as much of your savings in a tax-free home as you can.

Type 2 - The lock-away Larry

Does this sound more like you? You're happy to lock your money away for a while, and you want the certainty and security of a decent rate that won't fluctuate over the next year.

If so, what you need is a fixed rate cash ISA.

The highest rate available today is 3.50% from the Leeds Building Society 5 Year Fixed Rate ISA (Issue 10), which - as the name suggests! - is guaranteed for the next five years.

Interestingly, with most fixed rate ISAs, your money is tied up until the end of the term, but you'll be able to withdraw up to 25% of your original capital from the Leeds bond without triggering any penalties. This could turn out to be a valuable feature if you need to access some cash unexpectedly. But withdraw more than 25% and you'll lose 180 days' interest.

If five years is too long, you could try the First Direct Cash e-ISA which pays a fixed rate of 3.10% for a year.

Warning: Fixed rates will guarantee your return, but if interest rates rise you may find your return has become uncompetitive compared with other ISAs. Think about this risk before you commit.

Type 3 - The squirrel

How about this? You like to put some money aside every month without any hassle, you don't want to make any withdrawals, and you want to earn a competitive fixed return. So what you need is a regular saver ISA.

Unfortunately, regular saver ISAs are a bit thin on the ground these days, but if you're already a First Direct 1st Account customer - or you're happy to become one* - you'll qualify for the fantastic First Direct Regular Saver ISA.

(*You'll get a £100 switching bonus if you move your current account to First Direct.)

This account is the best by far, paying an excellent fixed rate of 7% for the next year on savings of £25 to £300 a month. But you won't be able to make withdrawals from the regular saver ISA during the fixed rate period.

Warning: Firstly, ISA rules only allow you to save your current cash ISA allowance with one provider during the tax year. But because the regular saver ISA lasts for a year, if you don't start at the beginning of the tax year then you'll have committed yourself to the same provider in the next tax year too. And secondly, the rate you earn after the year ends will probably be much lower, so you may need to transfer your savings somewhere new.

Type 4 - The transfer trickster

Finally, we come to the transfer trickster. You want to earn the highest rate possible on all your ISA savings, including old accounts from previous tax years. So you need an ISA which accepts transfers.

Luckily, you can move your money around from one ISA provider to another as much as you like. This means you can always chase the market leaders if you want to earn the best rates.

At the moment, the best buy for transfers is the NatWest e-ISA which pays a rate of 3.51% on balances over £10,000. If the amount you transfer is less than £10,000, you'll earn 3.25%.

Don't forget, not all ISAs accept transfers. You'll often find the accounts which pay the best rates will only take new ISA money. So, check the ISA you like allows transfers of old ISA money before you apply.

Warning: It's important you follow the correct procedure for transfers when you move your money around. The provider you want to transfer to should provide all the paperwork you need. Don't just withdraw money from one ISA and pay it into another because this will count as a new contribution, and that will use up more of your current ISA allowance.

Now you know the type of ISA you need, here's your final reminder: The tax year ends on April 5 which rather inconveniently falls on a Sunday this time round. So, get your skates on if you want to use up the rest of your allowance before it's too late.

Compare ISAs at lovemoney.com

More: The most consistent cash ISAs | Ten years of tax-free saving