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Five minute finance: ISAs & credit cards

 Five minute finance: ISAs & credit cards

Category: Savings

Updated: 01/03/2010
First Published: 01/03/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The last twelve months have dealt a severe blow in the level of return ISA savers can expect to receive. Bank base rate at an all time low for the last year has meant that savers opting for the security of a cash ISA have experienced one of the worst years on record, with the average rate payable over the last year standing at 2.01%.

By comparison, those investing in a stocks and shares ISA are on course to receive a record breaking year of returns, with the average ISAable unit trust/OEIC fund returning growth of 29.5% since 6th April 2009. Barring a dramatic fall in the markets over the next month, it means the current tax year is set to become the best performing year since ISAs were launched in 1999.

At present, the record for the highest annual return from a stocks and shares ISA was in the 2003/04 tax year, which saw a return of 27.8%. The new figures show a dramatic return in fortunes for investors after an annual loss of 21.4% during the 2008/09 tax year, the worst returns on record in the history of ISAs.

With the increased ISA limits coming into effect from the start of the next tax year, it is highly likely that savers disappointed by poor returns on cash ISAs will be increasingly compelled to the more attractive returns on a stocks and shares ISA.

Market leading ISA

Santander has just launched its Flexible ISA paying a market leading rate of 3.50%. The account guarantees to pay at least 3.00% above bank base rate for the first 12 months. Savers can invest from £1 into the account, which doesn't accept transfers in. The account can be operated in branch, online or by telephone and offers savers instant access to their money if they wish to make a withdrawal.

Nationwide launches range of ISAs

Nationwide Building Society has this week set out its plans to attract savers' ISA allowances. It has launched a range of ISAs including its Champion ISA Saver, which pays the average rate of the top five branch based rates of eight of its key competitors, up to 2.50% and includes a fixed bonus of 1.35% on balances over £1,000. Alternatively, savers can opt for the e-ISA, which pays 2.75% or opt for a market leading three year fixed rate ISA at 4.40%. All these products accept transfers in.

Lloyds increases rates

Lloyds TSB has just increased the rate on its Cash ISA Saver. The account now pays 2.50%, including a 1.50% bonus for 12 months. Savers can invest from £1 into the account, which accepts transfers in. The account can be operated in branch, online, by post or telephone and allows instant access to funds if savers wish to make a withdrawal.

Rachel Thrussell, Principal Consultant of Banking and Economic Insight at Moneyfacts, commented: "With the ISA season in full swing this new offering from Lloyds TSB, paying 0.50% than its predecessor, is good news for savers looking for a home for their Tax free allowance. At 2.50% it is among the market leaders and should prove popular with consumers who prefer to bank with a high street institution. The ability to transfer in previous years allowance should also appeal to those looking to consolidate their ISA funds."

AA drives forward

The AA has recently made changes to its credit card offering making it one of the most competitive deals on the market. The card now offers 0% for 12 months on balance transfer, subject to a 3.00% fee, minimum £3. Customers who apply for the card through selected comparison websites will also be offered 0% for 10 months on new purchases. Cardholders will receive points based on their purchases, which can be turned back into cash or purchases from a retail catalogue, with AA members receiving double points.

It pays to switch

Customers looking to switch their current account to Alliance & Leicester need to act fast if they want to secure the £100 incentive for switching, as the offer comes to an end on 7th March. The incentive is available to customers switching to the Premier Current account, which pays 0.50% on credit balances up to £2,500 and offers no interest charges on overdrafts for the first 12 months, after which the account charges 50p per day, maximum £5 per month. The account requires monthly funding of £500 per month and comes with free European travel insurance, as well as access to preferential rates on other financial products.

Find the best savings account for you fixed rate ISA or cash ISA also consider looking at our best sellers savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.