Current Account vs ISA & ISA vs ISA - which of the two is better?

puthsardarade

Hi,

My maths is not very good and I was hoping to someone could calculate and advice me which of the two options below are better?

1) Newcastle ISA Paying 5% Interest on £700 (unable to deposit more money into this ISA) Should I leave it there or move into my new Halfax ISA paying 3% which has £5200 transfered to it?

2) Lloyds TSB Vantage A.C. Paying 4% Interest Before Tax on £5340 or Santander Cash ISA paying £3.30% Interest Tax Free?

1st one - I know 5% is better than 3% but given the amount is £700 I'm just wondering if putting the £700 in an ISA paying 3% and therefore increasing the amount in this ISA from £5200 to £5900 would work out better for me?

2nd one - I'm not sure what 4% after tax would be and if it would be less than 3.30%? (I'm aware that the rate is likely to change to 3% following the recent news)

Thanks in advance

psychic_teabag

Interest on savings is "linear" : 3% on two separate amounts of A and B is the same as 3% on one account with (A+B). So you're better off leaving the £700 where it is - moving it to an account paying 3% means you are 4% worse off - it doesn't matter what's already in the other account. (Well, the only time it would matter is if the interest rate is tiered - some accounts pay X% on balances up to some threshold, or Y% if the balance is higher.)

Also, to be getting 5%, it's probably a fixed term account (possibly up to 5 years). So you can't move the money, or at least not without some sort of notice or interest penalty.

Assuming you pay basic-rate tax, 4% before tax is 3.2% after tax. So you'd be better off in the ISA paying 3.3%

mr_fishbulb

gagandeeptiwana wrote: »

Lloyds TSB Vantage A.C. Paying 4% Interest Before Tax on £5340 or Santander Cash ISA paying £3.30% Interest Tax Free?

Vantage account is dropping to a max of 3%
http://www.easier.com/86573-lloyds-tsb-vantage-current-account.html