Using a Cash ISA as a "Regular Savings" Account

adam515

Hi hope you are well. Just some context first that I live with my parents and am currently retraining after several years in and out of hospital. I have had no income for the past 3 years from anywhere such as benefits etc. Only income is from interest.


I have 3 Barclays accounts: regular (£90), e-savings (£1000) and Instant Access Cash ISA @ 1.48% (£35,000)


The e-savings interest gives £1 a month and will plummet anyway so I'm thinking I move the £1000 to the Instant Access Cash ISA and use that account to take money out if need be for any expenses.


My query is that Martin Lewis :money: advises never to take money out of an ISA. I agree with him, but in my context would it matter much?


There do not seem to be any limits or penalties for withdrawals and the £1000 I put in will return a substantially better interest than if it were sitting in a regular savings account. I don't expect an influx of cash this tax year either.


Does the above sound like a better plan than keeping the £1000 in a regular savings account? Thanks.

jimjames

adam515 wrote: »

My query is that Martin Lewis :money: advises never to take money out of an ISA. I agree with him, but in my context would it matter much?

That advice is very outdated for most people with the new ISA limits but for some reason MSE keep repeating it and confusing people.

adam515 wrote: »

Does the above sound like a better plan than keeping the £1000 in a regular savings account? Thanks.

Not really when there are far better rates available.

For £1000 you can get 5% elsewhere. I'd suggest making the most of the high interest current accounts especially if you are a non taxpayer then an ISA is pointless as you get interest tax free anyway.

Only issue would be if you have difficulty opening an account with no income but seems worth a go.

I'd also suggest moving as much as you can into the high interest accounts so you can maximise the income you get.

That £1000 could get you equivalent to 12.5% gross if you also opened a Halifax account. It pays £5 per month after tax (£75 before tax pa) so with that and 5% (£50 pa) you'd get £125 per year.

Add in some other accounts and with only £10,000 you will probably beat the total current interest paid on your whole £35,000 ISA.

redux

I'm not convinced.

There are bank current accounts and bank and building society regular savings accounts outside ISA's that pay 3 to 5%.

See other threads here. The regular savings one is usually updated at the weekend by the person who started it, so should be on the front page of the board again soon, or you can use the forum search function.

As for the ISA, I believe there are also a few regular saver ISAs around 3 or 3.5%, or you might consider stocks and shares in an ISA, so I'd suggest don't combine that £1000 you mentioned into your existing ISA and thus use this year's capacity, but consider starting a different ISA this tax year, not necessarily straight away but just leave the possibility open.

ColdIron

I believe the OP is using the term 'regular savings account' in the context of ordinary savings account and not the periodic, monthly savings account most will be familiar with

badger09

ColdIron wrote: »

I believe the OP is using the term 'regular savings account' in the context of ordinary savings account and not the periodic, monthly savings account most will be familiar with

Agreed

Regular, as in usual/normal/ordinary/standard
sounds more like US terminology :cool:

rather than recurring at uniform intervals or to a defined pattern.

adam515

Thanks for your advice, very useful. As you mentioned, I might have trouble with accounts that require regular deposits as I have no income, but I'll take a look at the options available and use the interest calculator to see how better off I may be. Cheers!

jimjames

adam515 wrote: »

Thanks for your advice, very useful. As you mentioned, I might have trouble with accounts that require regular deposits as I have no income, but I'll take a look at the options available and use the interest calculator to see how better off I may be. Cheers!

It's not the deposits that's the problem, it's the credit check. The bank might not approve it if you have no source of income but it's easy enough to transfer money if you do get an account. Lots of threads here with more info.