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Why Are Cash Isa's So Rubbish?

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When there are current accounts offering 3-5% interest with no major strings attached, why is it that cash ISA interest rates are so utterly uncompetitive? Even the headline rates don't beat the best current accounts, and they nearly all feature a massive drop off in rate after the 'bonus' period to catch out the majority.

Genuinely mystified. :unsure:

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Don't those higher rate paying current accounts usually come with conditions, such as maximum balance of.. not very much to make a difference, and usually and a monthly fee?

If I had total belief in hpc playing out as I expect it eventually will, without moments of doubt, then I'm not too bothered about low savings rates on ISAs ect. 0% rates on cash-deposits will be fine, when everything else is heavily losing value.

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....once they paid more than the average instant access savings account plus the benefit of all interest earned being tax free.....now there is no incentive to keep within an isa wrap, because you can get better paying savings accounts that pay more net, after basic rate tax paid.....madness. ;)

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....once they paid more than the average instant access savings account plus the benefit of all interest earned being tax free.....now there is no incentive to keep within an isa wrap, because you can get better paying savings accounts that pay more net, after basic rate tax paid.....madness. ;)

If you don't save your annual cash-savings ISA allowance, part of it, or all of it, then you can't get benefit of it compounding in future years, tax-free, if and when rates go up.

In those circumstances you might be less well off, having in the short-term saved £15K+ let's say, into just higher paying normal accounts, if you expect to be able to continue saving in subsequent years.

Although I'm not very hopeful about ISA savings rates going up, for a considerable time.

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Don't those higher rate paying current accounts usually come with conditions, such as maximum balance of.. not very much to make a difference, and usually and a monthly fee?

If I had total belief in hpc playing out as I expect it eventually will, without moments of doubt, then I'm not too bothered about low savings rates on ISAs ect. 0% rates on cash-deposits will be fine, when everything else is heavily losing value.

There usually are some restrictions on the current accounts, but then there are on ISA's too (annual limit, transfer restrictions, bonus cutoff).

Santander offer 3% interest on up to 20k (£50/month before tax) for a £2 monthly fee.

Nationwide offer 5% for no fee on up to £2500 balances (just saw that drops to 1% after 12 months, so not so great).

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just used an old natwest account as doner account.

setup up 2 direct debts

filled in transfer form

bobs my uncle

£100

transfer £750 in a month

bobs my uncle a £5 interest

transfer £750 out.

repeat next month

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....once they paid more than the average instant access savings account plus the benefit of all interest earned being tax free.....now there is no incentive to keep within an isa wrap, because you can get better paying savings accounts that pay more net, after basic rate tax paid.....madness. ;)

Well, quite. As I say, I don't understand it. More tax money to the Government, but how does it benefit the banks?

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They want us to put our money in Stocks and Shares ISAs instead.

.....Yes....the more that invest, the higher anything with a name will go, the more the middle/brokers will make in fees/advise....or put it on a house. ;)

The value of investments, and the income arising from them, can go down as well as up, and is not guaranteed, which means that you may not get back what you invested. Past performance is not a reliable indicator of future results. Changes in exchange rates may also cause an investment to fluctuate in value. Levels of taxation depend on your individual circumstances and the value of any tax reliefs which apply.

Whilst every effort has been made to ensure that the information we publish online is correct, * name* can take no responsibility for any action taken (or not taken) as a result of the matters discussed within it.

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Look, the banks don't want or need your deposits.

They can't or won't lend against excess reserves as it is... this is a money-dam waiting to burst.

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Edited by weaker

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Look, the banks don't want or need your deposits.

They can't or won't lend against excess reserves as it is... this is a money-dam waiting to burst.

How long before they start charging nominal money to store it? ;)

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How long before they start charging nominal money to store it? ;)

Right! - then it would become a money-pass-the-parcelbomb (-NSA,GCHQ screw you!)

No bank would want to hold balances with the Fed overnight, people would not want to hold money as bank deposits, negative gravity.

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They are trying desperately to inflate so they want your money in food, houses, fuel and stocks.

Edit:

Just saw a pack of butter go up 19p from £1.50 to £1.69 from last week. Whilst I was contemplating this rise a lady next to meet point out that the milk cartoon that she paid 84p for last week was now £1.14.

Edited by The Masked Tulip

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They are trying desperately to inflate so they want your money in food, houses, fuel and stocks.

Edit:

Just saw a pack of butter go up 19p from £1.50 to £1.69 from last week. Whilst I was contemplating this rise a lady next to meet point out that the milk cartoon that she paid 84p for last week was now £1.14.

Have never paid more than £1 for a pack of butter, anything that costs 50p more you are paying for marketing and advertising.......or make it yourself, then make some real bread to go with it. ;)

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Have never paid more than £1 for a pack of butter, anything that costs 50p more you are paying for marketing and advertising.......or make it yourself, then make some real bread to go with it. ;)

Jersey butter - very good for you. I am told that the cows spent their winters in Aruba.

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I have been told Jersey butter is very rich. ;)

I feel awful now - didn't mean to hijack the thread.

The cows on Jersey are mostly grass fed so I don't mind paying a slight premium for it but sod it when they stick a 13% increase on in a week.

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Look, the banks don't want or need your deposits.

They can't or won't lend against excess reserves as it is... this is a money-dam waiting to burst.

Maybe, but the question is why are cash ISA's offering worse interest rates than comparable non ISA savings and even current accounts?

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Maybe, but the question is why are cash ISA's offering worse interest rates than comparable non ISA savings and even current accounts?

I'd imagine it's because they know lots of people will put their money into the isa anyway as they don't want to miss that years allowance. Hence dont need to compete so much on rate

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I'd imagine it's because they know lots of people will put their money into the isa anyway as they don't want to miss that years allowance. Hence dont need to compete so much on rate

Pretty much what Venger suggested earlier, and there may well be something in this. Perhaps the annual ISA allowance should be bankable.

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I'd imagine it's because they know lots of people will put their money into the isa anyway as they don't want to miss that years allowance. Hence dont need to compete so much on rate

....The whole point in putting money into an isa is to get an overall better return....therefore the allowance is totally pointless, there is no point in having an allowance. ;)

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Pretty much what Venger suggested earlier, and there may well be something in this. Perhaps the annual ISA allowance should be bankable.

I think they should make the ISA limit £250,000 and make that a life time limit not small annual limit. This would encourage people to spend their money on say maybe a car Knowing that they haven't lost their tax free allowance for ever if they take it out.

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