Trading 212 easy access ISA 5.2% APY and 1% cashback. Too good to be true?

pecunianonolet

Hi all,

This sounds just too good to be true and I wonder if I have missed anything or if this is just an account that beats all the other market offers at the moment? I am a bit confused...

Trading 212 offers an ISA and offers 1% cashback (not counting towards an ISA allowance). The cashback is paid within 3 business days but locked for 1 year before it can be withdrawn or invested. 

ISA: https://www.trading212.com/isa

ISA Cashback campaign T&C's: https://www.trading212.com/legal-documentation/uk/isa/2/ISA-Deposit-Cashback-Terms_EN.pdf

ISA Deposit Cashback: https://helpcentre.trading212.com/hc/en-us/articles/9841189883933-ISA-Deposit-Cashback

Transfers: https://helpcentre.trading212.com/hc/en-us/articles/360007081117-Can-I-move-my-Trading-212-ISA-to-another-provider

It looks like there are a few options:

1. 
Transfer in from 6th April ( or before if you wish) any previous year cash ISA and you'll receive 5.2% interest on the "uninvested" funds. 

Interest is paid daily so you have the benefit of compounding interest with 5.2% APY. Funds are not locked away and you can transfer out at any time to a provider that allows transfer in. https://helpcentre.trading212.com/hc/en-us/articles/360007081117-Can-I-move-my-Trading-212-ISA-to-another-provider 

As it it is previous tax year money you don't meet the eligibility criteria for the cashback promotion.

2. 
Transfer in any funds from the new 24/25 tax year allowance with any of the accepted providers or by direct pay in and you receive the 5.2% APY and you benefit from the 1% cashback offer. A maximum of £200 in cashback possible, held for 1 year before cash becomes eligible for withdrawal 12 months after it's allocation. (Ideally you pay or transfer in £20K in a lump sum to access the full £200 in one transaction in a years time). 

It looks like to me that there is no holding period, so someone could pay in / transfer in 20k, get the £200 in cashback into the 5.2% account and transfer out the 20K again to another provider should you not trust Trading 212 with your cash. 


Important, to receive interest you have to agree that Trading 212 can invest your cash in QMMF's. Trading 212 states that money placed with a QMMF is treated as an investment and not as money held with a bank. That sounds like the 85k FSCS protection doesn't apply and your money is at risk.

More here: https://www.trading212.com/interest-on-cash

Since QMMF's are low risk it comes down to how risk averse you are.

In short, with some transfer in and out you should be able to make £200 in cashback, which you can withdraw in 12 months and you can either leave or skim of any interest during this time. 

If you accept the risks, your ISA funds could make a 5.2% return with daily paid interest and easy access to transfer away.

Aside of the QMMF risk, albeit a small risk unless WW3 starts or 2008 crash materialises or any other major unforeseen events occur, I personally would deem it as a calculated and manageable risk.

Almost sounds all too good to be true so I wonder if I have missed anything?

EDIT: Am I right, APY and AER are interchangeable terms but in the end yield the same result?

masonic

They have published the APY calculation. It is a rare example of daily compounded interest.

The interest rate is variable and not guaranteed. This is not a return that looks too good to be true for this level of risk, and there is a strong likelihood your actual return after a year will be below 5% as rates come down (assuming they do of course). There are several fixed cash ISAs paying north of 5% I'd expect to return more before cashback is taken into consideration, and possibly after. But it does appear you could transfer in and out to get the best of both worlds.

The interest option is useful so far as it saves manually investing in a money market fund as an investor holding cash within your trading account or S&S ISA.

pecunianonolet

Thanks @masonic, so what I described above is working in both scenarios. I am aware that a 1y fix is 5.25% at the moment but in some cases people prefer to keep the money accessible. 

I am aware that capital is at risk due to it counting as investment and not as saving. The question is, how risky are QMMF's really so what is the real risk. 

Also, someone who is after £200 cashback and has 20k available come 6th April and is not afraid to make a pay in/transfer in and transfer back out could bank this rather easily, although the cashback would only be accessible after 1 year.

masonic

pecunianonolet said:

Thanks @masonic, so what I described above is working in both scenarios. I am aware that a 1y fix is 5.25% at the moment but in some cases people prefer to keep the money accessible. 

I am aware that capital is at risk due to it counting as investment and not as saving. The question is, how risky are QMMF's really so what is the real risk. 

Also, someone who is after £200 cashback and has 20k available come 6th April and is not afraid to make a pay in/transfer in and transfer back out could bank this rather easily, although the cashback would only be accessible after 1 year.

Money in a fixed cash ISA is always accessible due to HMRC rules, it is just a question of what penalty would be imposed. If accessibility is desired just for emergencies, this might be acceptable.

Their QMMFs could have varying degrees of risk depending on how short term they are and what they invest in. They may have exposure to domestic and international interest rates. They are not disclosing enough detail to understand this. They may perform better or worse than a base rate tracker in different circumstances. The loss potential of such funds should be very low, not the double digit loss potential of standard bond funds.

I might be tempted to take advantage of their cashback offer for my 2024/5 S&S ISA, but the interest is not of interest to me and I would invest what I subscribed.

gravel_2

Believe you can also benefit from a free fractional share if signing up with a friend or influencer's link. Not likely to be a major money maker but it is an extra sweetener on top of the two promotions above.

Aidanmc

gravel_2 said:

Believe you can also benefit from a free fractional share if signing up with a friend or influencer's link. Not likely to be a major money maker but it is an extra sweetener on top of the two promotions above.

I benefited from a free share previously, since then i must have deactivated my account.

Deactivated accounts cannot be reactivated, a new account must be opened.

I wonder if its worth trying for another free share?

masonic

Aidanmc said:

I wonder if its worth trying for another free share?

I'd be in the same boat, no harm in trying I guess.

Money_Mad

Does anyone have any experience of using Trading 212? I’m seriously considering using them for my 2024/25 ISA given the 1% Cashback offer. 

Anyone wish to share their pros and cons of using this platform.

pecunianonolet

OH and I have both accounts and got free shares in the recent referral campaign. So far no issues and customer service was easy to deal with and responsive in chat. Interest payments on time with app notification (can be disabled) each morning about the interest amount. Pay in via open banking is easy and instant. Full broken down account statement comes by email. 

Do not have an ISA with them, was considering moving in but I go with the Virgin 5.25% fix instead I have as maturity option. 

boingy

They are fine as a company to deal with but the home page of their app is like being in a video game with your portfolio consigned to the top corner whilst the rest of the screen is filled with prices and trends and graphs of lots of shares that you don't own but are in the "top whatever" category. It might be to some folks taste but I found it quite irritating. It's a bit like those TV add that try to make investing all "rock and roll" rather than realistic.

There might still be a free share offer running if you are a new customer. I got one third of a Walt Disney share worth about £25. The link was on the main MSE site somewhere.

armistice

I've used Trading212 for many years. I joined to because of the zero fee share trading and fully expected that to be a short term thing that would be removed once they were established (So glad its permanent).  I've stayed and use them for my S&S ISA because its zero fee.  That alone is of more value than joining for a free fractional share.

boingy said:

They are fine as a company to deal with but the home page of their app is like being in a video game with your portfolio consigned to the top corner whilst the rest of the screen is filled with prices and trends and graphs of lots of shares that you don't own but are in the "top whatever" category. It might be to some folks taste but I found it quite irritating. It's a bit like those TV add that try to make investing all "rock and roll" rather than realistic.

My homepage shows my portfolio, perhaps you just need to choose what's displayed.  However as a stocks & shares dealing app I would expect a lot prices/trends and graphs to be useful.

In general Trading212 have been a reliable, low cost, trustworthy platform.