How is ISA interest accrued/paid

JuC

I have just received £10,000 and am considering what to do with it. Sorry these are pretty basic questions but I've not had an ISA for years...


If I open a Post Office cash ISA within the next week or so with 1.5% interest will I get £150 interest paid in April or is it paid 'pro rata' based on how long the money is in there?


I am then thinking of taking it out again in April and putting it into Premium Bonds (I already have some) as based on the winnings this financial year I have done just as well as if the money was in an ISA.


So really what I am wanting to know is, if I will gain anything by opening the ISA for a few months or should I put it straight into Premium Bonds.

YorkshireBoy

You only earn/accrue interest if your money is in an account where it can earn/accrue interest!

If your money is not in an account it can't earn/accrue interest!

Think about it...do you really think you could dump money in an account for a day/week/month/6 months and get a full years interest on it? If you could, no one would put any money in a cash ISA until 23:59 on the 5th of April each year!

If you deposit in an ISA now, you'll earn roughly:

£10K x 1.5% / 365 x n

where n = the number of days the money is in the account.

Nick_C

1.5% is a poor rate. You would be better putting it into a 123 current account. 2.4% after basic rate tax, or 1.8% if you are a higher rate tax payer, paid monthly. Better rates are available in other current accounts, but you would need multiple accounts for your £10K.

PBs - if you win nothing in the next year (likely), you are losing value as you are not keeping up with inflation.

JuC

Nick_C wrote: »

1.5% is a poor rate. You would be better putting it into a 123 current account. 2.4% after basic rate tax, or 1.8% if you are a higher rate tax payer, paid monthly. Better rates are available in other current accounts, but you would need multiple accounts for your £10K.

PBs - if you win nothing in the next year (likely), you are losing value as you are not keeping up with inflation.

Thanks for this suggestion. Its good to consider other things.

I already have a Club Lloyds account which I want to keep so not sure if I could keep both that and the 123 account going... Also bills all come out of OH's account so wouldn't benefit from the 123.

Nick_C

I have 4 current accounts, some users of this site have many more! The only real difficulty is maintaining the necessary DDs. Would your OH be happy to move some DDs to a 123 current account? If so, you could also get cashback on the DDs, which should offset the monthly fee and probably leave you in profit.

colsten

Nick_C wrote: »

The only real difficulty is maintaining the necessary DDs.

DDs are a doddle with Tesco savings accounts.