Cash ISA instead of regular savings account? Is there a difference?

UndergroundSaxClub

Hi all.

Bit of an odd situation, hoping for a shine of the light. I currently have a Santander Edge Saver account at 3.93% interest, of which anything over 4k I believe is subject to a lower interest rate, and a regular saver also at 3.93%, which will reduce to 2.96% on August 1st.

Having read the latest MSE newsletter they have a 4.92% Cash ISA with Trading212 for a year, and I am due to make a large mortgage overpayment in August of which there will be no early repayment charge.

My question is mostly about timing. Does it make sense to open a Trading212 account today, shift everything in and gain interest for 1 month before August, and then use it as a regular savings account due to the higher interest, or am I better waiting until after my overpayment for "safety" and simplicity, should anything strange occur?

masonic

The Edge Saver pays 6%. If you're getting less than that because the initial bonus has expired, you can close it and open another with the bonus rate.

The ISA is worth having, but the interest difference over 1 month is not going to be significant. Worth it for longer term savings, but perhaps not if it's only for money you will need for the overpayment.

Newbie_John

ISA is mostly beneficial to avoid tax if you reached your £500/£1000 limit. 
The 4.92% is variable so over year it will likely go down.
Also it takes some time to open it.

What rate is your mortgage? As is it's less than % you get from savings (after tax) then there's no point overpaying it..

UndergroundSaxClub

masonic said:

The Edge Saver pays 6%. If you're getting less than that because the initial bonus has expired, you can close it and open another with the bonus rate.

The ISA is worth having, but the interest difference over 1 month is not going to be significant. Worth it for longer term savings, but perhaps not if it's only for money you will need for the overpayment.

Thank you that is very interesting. In this case I might just re-open with 6% and setup Trading212 for any amount over 4000 for the next year.

Newbie_John said:

ISA is mostly beneficial to avoid tax if you reached your £500/£1000 limit. 
The 4.92% is variable so over year it will likely go down.
Also it takes some time to open it.

What rate is your mortgage? As is it's less than % you get from savings (after tax) then there's no point overpaying it..

Thanks for the reply. I'm due to change deals in September hence being able to overpay with no charge, I'm currently being quoted about 4.20%, with my fingers crossed this goes down in August with enough time to change deals again.

jimjames

Also be aware that the term regular saver account normally refers to an account where you have a limited amount you can pay in each month for a limited time such as 12 months for a higher interest rate. It doesn't sound like your account is one of these.