The top 16 cash ISAs

Looking for a better cash ISA? Then you've come to the right place!

A couple of weeks ago, I finally got around to ditching my rubbish cash ISA and trading it in for a much better one. Yes, it makes a change, but I decided it was time to practise what I preach. After all, the interest rate on my existing cash ISA was pretty pitiful, so I really had no excuse.

• Watch this video: Are ISAs as nice as they seem?

And I have to confess it was a relatively painless exercise. I simply filled in a couple of forms, sent off some ID and details of my existing ISA, and the transfer was complete. My brand new ISA is now open, and I am happy in the knowledge that I am earning a better rate of interest on my cash.

With the ISA deadline (5 April) only a matter of weeks away, if you’re planning to switch to a better cash ISA, or you’re simply looking to open a new account, now is the time to do it. So let’s take a look at the best cash ISAs on the market.

The best rates for easy access

If you’re a little reluctant to tie up your money in a fixed rate cash ISA, your best bet is to select an easy access cash ISA. The chart below highlights some of the top easy access ISAs.

The Santander Flexible ISA is clearly the best option here, offering a fabulous interest rate of 3.50%. And although this rate is variable, it promises to pay 3% above the base rate for the first year. Of course, once that 12-month period is up, you may find the interest rate is no longer so competitive, and you will need to move your funds elsewhere.

The major drawback to this account, however, is that if you’ve got an existing ISA and you’re hoping to transfer your funds across to the Santander Flexible ISA, you won’t be able to, as this ISA doesn’t allow transfers in.

Plus, as of this week, Santander wiill not be taking any further online applications for the Flexible ISA, although applications are still available on the telephone on 0800 587 2764 or via a branch. This change won’t affect any applications currently being processed, only new customers who want to open an account. By making this change, Santander is hoping to avoid the customer service problems that have plagued ISA market-leaders in the past (namely, Barclays customers).

Which leads me neatly onto the Barclays Golden ISA. This ISA is another good option, with an interest rate of 3.10% - but again it doesn’t allow transfers in, and as I say, Barclays ISA customers have suffered from customer service problems in the past.

You should also bear in mind that the Barclays Golden ISA has a bonus rate of 1% for the first year. So again, once that 12 months is up, you may need to move your funds elsewhere.

That said, bonus rates are becoming increasing popular for cash ISAs – as the above table shows – so it’s worth keeping this in mind.

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However, the major downside to these accounts is that to qualify for this interest rate you will need a balance of at least £9,000. Anything under this, and the rate will drop to 2%, with a bonus of 1.50%.

Alternatively, the Nationwide e-ISA also offers an interest rate of 2.75%, with a bonus rate of 1% fixed until next June. This account can be opened with just £1.

Go for a fixed rate

If you’re happy to tie up your funds for a year or more, you could consider a fixed rate cash ISA instead.

The chart below highlights some of the top fixed rate cash ISAs for terms between one and five years.

Of course, the longer you’re prepared to tie up your funds, the higher the rate of interest you will receive. Just bear in mind that generally, with a fixed rate cash ISA, once you’ve made your initial deposit, you won’t be able to make additional payments into the account.

I would also be wary of locking up your money for too long. Although interest rates of between 4% and 5% may look tempting on the four and five year cash ISAs, interest rates are likely to increase before then. This means that what may have initially been a competitive account may not be a few years later.

Finally, don't forget that the amount you can save into a cash ISA increases next year, from £3,600 to £5,100 (it's already increased for those aged 50 or over on April 5th 2010). You can download a free guide explaining how you can benefit from the new rules here.

So what are you waiting for? Get switching to a better cash ISA today!

Watch our video: 3 tips on opening your first ISA

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