Chip Smart Cash ISA - Beware this condition...

w0z

Just a heads-up for those thinking of opening a Chip Smart Cash ISA.

It has much going for it for the first year as a new customer, good rate for 12 months after opening (variable but tied to BOE rate) it's flexible so cash can be withdrawn and replaced (in the same tax year), albeit withdrawals are not same day they take one working day, so what's not to like?

This.

UNPAID INTEREST IS FORFEITED IF ACCOUNT IS CLOSED OR TRANSFERRED OUT

This is a potential trap and an unexpected (and in my opinion unfair) condition.

Interest is paid monthly on 10th of each month.

As there is no way to time exactly how long an ISA transfer-out would take, you risk losing UP TO a month's interest if you transfer out. Best case the transfer-out completes a couple of days after 10th*, worst case it completes on 9th and you lose a whole months interest.

*I have today out of curiosity asked them the following:-

"If a transfer-out COMPLETED on 11th of the month would the interest paid on 10th month be included in the funds transferred?" I am awaiting a reply.

I'm assuming "Unpaid Interest" means any interest accued between 10th month and 9th of the following month which they haven't yet paid into the ISA. If so the only way to ensure no significant loss of interest is to permanently withdraw most of the funds as cash before closure. The isa status on that cash would be lost, then you would have to wait for the interest to be paid on 10th, and then close the ISA.

If you chose to ISA transfer-out rather than the above, the account would be rather less attractive than at first glance; what started as a 4.54% rate, (assuming no change) could end up being as low as 4.16% if you were to lose a month's interest (worst case 1/12th of the interest assuming you were invested for a year, a higher percentage if less than a year).

In fairness over a year this still isn't a terrible rate but the principle of forfeiting interest rankles.

If you decided to stay for over a year the rate would reduce by the boosted rate of 0.79%, to 3.75% but that condition would still be hanging over you.

(All figures assuming no changes in rate tor the year but of course that is highly unlikely)

I'm not dissing Chip,overall it's a good product but with what could be, in some circumstances, a significant flaw.

winkowinko

Spotted this too…

We are currently only able to support transfers into your Chip Smart Cash ISA from your Chip Instant Access Cash ISA (provided by Chip Financial Ltd). You cannot currently transfer a Cash ISA that you hold with another provider to your Chip Smart Cash ISA.

w0z

Bonus rate is now withdrawn.