Last year, 58% of the money placed in ISAs was saved into cash accounts, according to Halifax. There is less than a month to make use of this tax year's cash ISA allowance, so if you want to make use of it, you need to move fast.
The seasonal buzz around ISAs is likely to last well into the new tax year, as the amount you can save a year is increased to £5,100 in a cash ISA and £10,200 overall. Read our article 'New ISA rules explained' for more information.
So where are the best cash ISA deals and what kind of saver will get the best use out of them? Here's a pick of the leading deals so you can find the best account for your needs:
Fixed rate cash ISAs
The interest earned on money in cash ISAs is tax-free so you should aim to keep it there for as long as possible. If you need to dip into your savings, use non-ISA money first.
With this in mind you may feel you can afford to lock in to fixed rate cash ISA. Fixed rate deals are offering the highest returns at the moment but they come with a major caveat - you cannot usually access your money during the fixed term. In some instances withdrawals are permitted but you'll be charged a hefty penalty.
Clydesdale Bank five-year fixed rate ISA
Rate: 5.00% AER
Accepts transfers? Yes
Access: Branch and postal
This is the best cash ISA rate available at the moment. What's more, transfers in are accepted so if you have money from pervious tax years languishing in cash ISAs that are no longer paying competitive rates of interest, you can move it without losing the tax-free status.
However, you'll need to be willing to lock your money away for five years, with no withdrawals allowed during that period. You can close the account, but you'll pay an early closure charge. The size of the penalty will depend on how long is left of the fixed term and the amount you have in the account, but it will be at least £30.
Account holders must pay a minimum deposit of £2,000 but there's no limit on the amount you can transfer in from existing ISAs.
Nationwide three-year fixed rate ISA
Rate: 4.40% AER
Accepts transfers? Yes
Access: Branch only
Of course, not everyone will be happy to lock their money away for that long. Perhaps you want to be able to make withdrawals before then, or maybe you think interest rates are likely to rise and make the Clydesdale account uncompetitive.
If that's the case, the Nationwide three-year fixed rate account might be the best compromise. It's paying the highest rate available on a three-year deal and far outstrips the returns you'll make using an easy access account.
As with the Clydesdale account, you can't make withdrawals during the fixed term. If you need to close the account early, you'll lose 270 days' interest.
The rate of 4.40% is based on annual interest. There is a monthly interest option if you prefer, with a marginally lower annual equivalent rate of 4.39%.
It's also worth bearing in mind you can only access this account in a Nationwide branch.
SAGA two-year fixed rate ISA
Rate: 3.60% AER
Accepts transfers? Yes
Access: Postal only
This is the best two-year rate but not everyone will be able to make use of this market-leading account. You need to be aged 50 or above to qualify for this SAGA account and there's also the little matter of a £30,000 minimum deposit.
However, many over-50 savers will have saved that much during previous tax years and these people can benefit from a short-term, leading rate. Transfer or pay in less than that and you'll earn 3.50% which is still highly competitive.
If you need to access your money during the fixed term you can do so, but subject to a loss of interest - 180 days if a withdrawal is made during the first year, and 90 days if you make a withdrawal during the second year.
This account can only be accessed and administered by post.
Halifax two-year Fixed Rate ISA Saver
Rate: 3.50%
Accepts transfers? Yes
Access: Branch, telephone, internet
If you don't qualify for SAGA's leading two-year deal, this is the next best account. The minimum deposit is a much more affordable £500 but it also accepts transfers, so you can pay in balances from previous years. That's a major plus as many of the leading ISA deals don't allow you to transfer other ISA balances over to take advantage of the rate.
This is a leading deal for savers who want the security of a fixed rate without committing to three or more years without acess to their money. It even allows withdrawals, although you should avoid doing so as you'll lose 180 days of interest for the privilege.
Rate: 2.70% - 3.30% AER
Accepts transfers? Yes
Access: Branch, telephone and internet
If you've invested in cash ISAs in previous tax year, chances are the rate of interest you are earning has plummeted and you should look to move it to a better-paying account.
The Lloyds TSB fixed rate cash ISA pays interest of 2.70% AER on balances up to £14,999; 3.00% if you've saved between £15,000 and £29,999; and 3.30% on anything above £30,000.
Unlike most fixed rate accounts which don't allow any withdrawals during the term, you can access your money if you need to. However, if you do make a withdrawal within the two year fixed term, you'll lose 160 days' interest.
If you think it is likely that you may need access to your ISA savings over the next year or two, an easy access account is probably a better option.
Easy access cash ISAs
Santander Flexible ISA
Rate: 3.50% AER
Accepts transfers? No
Access: Internet, cash machine, branch, postal
This is the leading easy access account on the market just now, paying a base-rate busting 3.50% but still allowing you access to your cash. It's also available under the Alliance & Leicester (A&L) brand, which is owned by Santander.
It is a variable rate account but it's guaranteed to stay 3.00% above base rate for the first 12 months. However, after that, the rate will drop to whatever Santander's variable rate is - currently, it's 0.50%. That means you should be ready to move your money after a year.
Barclays Golden ISA - Issue 2
Rate: 3.10% AER
Accepts transfers: No
Access: Branch, internet and phone
Launched on Monday, this is a good alternative if you are looking for an easy access account but don't want to go for the Santander Flexible ISA. Again, though it is only available for new ISA money - you can't transfer savings invested in preious tax years. This means the maximum you can pay into the account this tax year is £3,600 - £5,100 if you're aged 50 or over. If the account is still available in April, you'll also be able to pay your 2010/2011 allowance in which is rising to £5,100 for everyone.
This account includes a 12-month bonus of 1.00%, so you'll probably want to reconsider your cash ISA account in a year and transfer your funds to a more competitive deal.
Rate: 2.00% - 2.75% AER
Accepts transfers? Yes
Access: Internet, phone or postal
This is the best rate going when it comes to an easy access account that accepts transfers from previous years as well as this year's saving allowance.
If you want to transfer money from previous tax years you won't do better than this cash ISA deal.
However, this account is aimed at those looking to make an ISA transfer as the high rate of 2.75% is only available on balances of £9,000 or more. It is less competitive on balances of less than that - you earn just 2.00% below £9,000.
This account includes a 12-month bonus of 2.25% if you qualify for the initial rate of 2.75% and 1.50% if you earn the lower introductory rate of 2.00% so after the first year you will need to consider moving your money to secure a better rate.
Once again, this account is also available under the A&L brand.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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