How to Compare ISAs
- 1). Consider the basics. One of the key elements to look for when comparing ISAs is the nature of the accounts. Most banks and building societies offer competitive Cash ISAs as well as Stocks and Shares ISAs. Cash ISAs are just a normal savings account on which you can earn tax-free returns. Stocks and Shares ISAs, on the other hand, invest in shares, bonds and property on your behalf.
- 2). Determine the type of ISA you are being offered. Having decided between a Cash ISA and Stocks and Shares ISA, select the type of account most suitable to your needs. Most Cash ISAs are either fixed term or fixed rate accounts, which enable you to earn a tax-free fixed rate of interest over a fixed term. Stocks and Shares accounts offer a choice between an open-ended account, in which you can invest for as long as you need, or a fixed-term investment for five to six years.
- 3). Compare ISA interest rates. The rates of interest vary between providers and also according to the type of account you choose. Opt for the ISA that promises the highest returns for your investment. As an example, as of June 2010, Santander's ISA Direct Issue 6 offers just 1.99 per cent interest. At the same time, the same bank's Flexible ISA Issue 2 offers a much more attractive interest rate of 3.2 per cent.
- 4). Consider how accessible the account will be and assess your needs. With internet banking gaining popularity over traditional banking methods, more and more financial institutions are providing online operated accounts. While some ISAs are still accessible at your local branch, the majority can only be accessed via Internet banking or telephone banking.
- 5). Compare the benefits. As well as being able to make unlimited deposits (bearing in mind your given yearly allowance), some banks also permit a number of withdrawals without penalty. If you are likely to take out some money during the saving period, it may be best to go for an ISA that allows you the greatest number of withdrawals without penalising you for it.
