Cash ISAs - Proof We're Playing A Game
April 2005
Both the InvestorProfit.com and the LearnMoney.co.uk website have long argued that the Personal Finance world is one big game. We the consumers are on one side, the financial firms on the other. And like any consumer in any business if we don't understand what we're buying the chances are that the predators (the finance firms) are going to come out the winners, grabbing more of our hard earned money or selling us over priced and inferior products.
But don't take this personally, the companies themselves are not at fault, it's just Darwinism capitalism, the way of the world so to speak. But you can easily fight back by simply doing your own research and shopping around. And if you know what you're talking about you can start to play the games by your rules, not anybody else's
Want Proof - Exhibit Cash ISAs
There is no better proof of games being played than with the recent advertising and promotion of Cash ISAs. Cash ISAs are a form of tax-free investment funds which allow up to £3,000 a year to be deposited. They are therefore very popular.
Example 1 - The Portman Building Society
- Their Cash ISA promises to pay interest of 7.5% (the deal looks like a blockbuster) via the Regular Saver account
- However, lump-sum deposits are not excepted and exactly £250 a month must be paid in
- This means that interest only builds up gradually so savers only return £121.03 in the year
- If the account had no-strings and paid 7.5% it would return around £225
- Therefore an investor who pays in a full £3,000 lump sum to another ISA provider would need an interest rate of only 4.05% to beat the 7.5% offered by the Portman!
Example 2 - Bradford & Bingley Mini Cash ISA
- This one pays 6.00% a year with customers depositing between £10 and £250 a month
- However, if just 1 monthly payment is missed the interest rate drops to 4.55%
- Meaning that if savers invested a lump-sum of £3,000 into an account paying 4.55% they would be far better off without all the hassle of the Bradford & Bingley account
- One almost gets the impression that B&B wants its clients to miss a payment.....
Example 3 - Alliance & Leicester Direct Cash ISA
- This account pays 5.40% interest on balances of £1 or more
- The catch is not so bad but still a liberty, if savers make withdrawals they face an exit penalty of £25
100% No Catch ISAs
These top 3 paying ISAs offer NO catches at all;
Summary
It's almost as if the finance firms pre-load any good deal with small print hoping that many won't spot the stipulations until its too late, or even many won't understand them at all.
But those who do their homework will understand, and not only that will be able to spot the best deals and allocate their capital accordingly.
Helpful Links
|
