Chip Smart Cash ISA - Beware this condition...

Jaunty

https://forums.moneysavingexpert.com/discussion/comment/82175484#Comment_82175484

Chip did not hang around but have denied any issue. I will lodge a complaint with the FSA EDIT - should say FOS. Ta.

Reference: xxxx Complaint Final Response Letter Dear Mr xxx Thank you for your patience while we investigated your complaint, which we received on 25th September 2026.  We are sorry that you felt the need to raise a complaint. We have now completed our review of your concerns regarding the exit penalty applicable to the Chip Smart Cash ISA, specifically the forfeiture of unpaid interest when an account is closed or transferred to another ISA provider. You have asked us to confirm that the exit penalty will be waived and that you will receive all interest calculated up to the effective date of transfer, including any interest which has accrued but has not yet reached the scheduled monthly payment date. Outcome of the Complaint: Not Upheld Following our investigation, we have concluded that your complaint is Not Upheld. We appreciate that you have raised a number of detailed concerns regarding the visibility and application of the exit penalty. We have considered these individually, including your concerns regarding the CRA, the timing of interest payments and the potential financial impact of the provision. Findings The Smart Cash ISA terms provide: “If you close your Cash ISA or transfer your Cash ISA to a different provider Chip will charge an exit penalty consisting of any unpaid interest on your deposits.” The terms also explain how interest is calculated and paid. We recognise that your concern is not simply whether the provision was disclosed to you, but also whether it was sufficiently transparent and whether the financial impact of forfeiting unpaid interest makes the term unfair or creates an unreasonable barrier to transferring or closing your account. We have therefore considered the substance of your concerns rather than relying solely on the fact that the provision appears in the contractual documentation. Disclosure and transparency Alongside the Smart Cash ISA Terms, customers are informed of the accrued interest penalty on the account opening page as well as within a screen of the onboarding journey. This is explicitly included to ensure that customers are aware of this term and we therefore do not consider that this term was hidden from you when you opened the account.  Having reviewed the relevant documentation and the way the provision is presented to customers, we consider that the exit penalty is transparently communicated. The relevant term expressly explains that unpaid interest will form the exit penalty if the Cash ISA is closed or transferred. We therefore have not identified a failure in relation to the transparency of this provision. Accrued but unpaid interest You have argued that, because interest is calculated daily, interest which has accumulated before the transfer date should be regarded as an amount already owed to you, and that forfeiting this amount is therefore disproportionate. We have considered this point carefully. The daily calculation of interest is the method used to determine the interest applicable to funds held within the Smart Cash ISA. It does not, in itself, mean that the calculated amount becomes payable independently of the other terms governing the account. The contractual terms determine the date at which accrued interest is due and payable, and therefore the point at which it becomes client money. These terms explain this due and payable date clearly and expressly provide for unpaid interest to form the exit penalty where the account is closed or transferred. For this reason, we do not agree that the application of the provision represents the retrospective removal of an amount which Chip had already become unconditionally liable to pay. You have also raised concerns that the financial impact of the exit penalty can vary depending on when a transfer takes place in relation to the monthly interest payment cycle. As stated through the terms and product documentation, the exit penalty applies to unpaid interest whenever the account is closed or transferred. Interest continues to be calculated in accordance with the Smart Cash ISA terms while the account remains open. We would like to be clear that the provision does not operate as a charge imposed to recover the administrative cost of processing an ISA transfer. Rather, it is a contractual feature of the Smart Cash ISA which determines the treatment of unpaid interest when the account is closed or transferred. We have also considered your point that the exact date on which an ISA transfer completes may not always be within the customer's control. At the point of transfer the ceding transfer provider ceases to accrue interest while the transfer is in progress. We hold this to be true across the ISA provider industry and it is not specific to Chip nor to the Smart Cash ISA. When processing a transfer we work within industry guidelines to ensure that we complete our part of the ISA transfer process within expected timeframes to ensure that a customer is not unduly penalised for transferring out.  The contractual terms of the receiving provider will determine at what point interest begins to accrue on their side of the transfer; industry guidance also exists to support providers in determining this point. We refresh our product assessments on an ongoing basis and take customer feedback into account as part of this process. For instance in June 2026 we made changes to the Smart Cash ISA after reviewing customer usage and feedback. At its launch the Smart Cash ISA paid interest annually on the customer’s anniversary date with forfeiture of interest applying to any accrued unpaid interest in that time period. We made the decision to introduce a change to interest payments moving to the product’s current monthly cycle. We retained the provision for forfeiture tied to unpaid interest while the customer impact of the term has been lessened by the move to a monthly cycle. Chip is required to comply with the applicable rules and regulations set by our regulators, including the Financial Conduct Authority (FCA) and we have not identified any failing in this regard at this time. We appreciate that this may not be the outcome you were hoping for. However, we hope this letter explains the reasons for our decision and demonstrates that we have considered the substance of your concerns rather than simply relying on the fact that the term appears in our documentation. Access to the Financial Ombudsman Service You have the right to refer your complaint to the Financial Ombudsman Service, free of charge, but you must do so within six months of the date of this letter. If you do not refer your complaint in time, the Ombudsman will not have our permission to consider your complaint and will only be able to do so in very limited circumstances. For example, if the Ombudsman believes that the delay was a result of exceptional circumstances. The contact details of the Financial Ombudsman Service are as follows: Financial Ombudsman Service Exchange Tower London E14 9SR Email: complaint.info@financial-ombudsman.org.uk Website:www.financial-ombudsman.org.uk Telephone: 0800 023 4567 or 0300 123 9123(from a mobile) For more information, please read the guide ‘Your Complaint and the Ombudsman’ via the Financial Ombudsman Service website. Thank you for taking the time to share your concerns with us. We recognise the importance of feedback of this nature and will continue to consider customer feedback as part of our ongoing product governance and Consumer Duty obligations. Yours sincerely, Samara ComplaintsTeam  Chip hello@getchip.uk Chip Financial Ltd (“Chip”) is registered in England and Wales, registration number 10113174. Our registered office is: Sixth Floor, Fora Montacute Yards, 186 Shoreditch High Street, London, E1 6HU. Chip Financial Ltd is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. Firm Reference Number 911255. Chip Financial (Investments) Ltd is authorised and regulated by the Financial Conduct Authority, under Firm Reference Number 1005114. Chip

w0z

Well that's pretty clear then, they (Chip) must think they are on solid ground, so I think this will likely hinge on whether the forfeiture is considered to be an unfair contractual term. Personally like many others on here I think it is (unfair) because the man on the Clapham Omnibus, as shown by the discussion on this forum, can neither understand or have certainty of what are the precise and accurate implications of that term.

We shall see.

Although I opened this ISA, it was precisely because of this term that:

1. I decided not to fund the ISA
2. I no longer trust Chip.

I hope Chip are reading this.

winkowinko

Will be interesting to see how this one pans out.

I'll be giving them a swerve for now.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82175911#Comment_82175911

As they point out, the escalation route for consumer complaints is to the Financial Ombudsman Service.

friolento

The FSA doesn't deal with consumer complaints. You can only go to the FOS.

As annoying as the Chip ISA terms are, I doubt the FOS can rule in your favour. They don't have the power to direct the services providers to change their T&Cs.

The only option you have is to give them a wide berth in future, and to tell everyone who considers Chip to think twice.

Jaunty

https://forums.moneysavingexpert.com/discussion/comment/82176164#Comment_82176164

Thanks, was on autopilot I meant FOS. Easy enough to notify to them and see what they say. May take sometime though!

Tom_Hendo

Thanks for this thread. I just initiated a transfer to them, but after this I have cancelled it successfully. So many red flags .

Can someone help me with one element. If interest is accrued for Month 1, and paid on the 14th (10th working day) of the next month..... Don't you also lose compound interest for Month 1 accrued interest between 1st and 13th of the following month. Won't this make their AER wrong?

If it was just 1-5 days I would lose due to being begining of month after 1st month payment, I'd be almost fine with this account.

Tia a shame as it's going to 5:03% in 2 weeks most likely

w0z

The terms state ←link "You will earn interest on your balance daily. Interest is calculated each day at 23:45 (UK time) and is calculated
on the settled balance amount. It will be paid monthly on the 10th business day of each month into your Chip
Smart Cash ISA.…

…. Chip does not charge a fee or penalty for withdrawals you make from your Chip Smart Cash ISA.

If you close* your Cash ISA or transfer your Cash ISA to a different provider
Chip will charge an exit penalty consisting of any unpaid interest on your deposits…."

I interpret that as any preceding days to the 10th (business day) of current month from the 11th (business day) of the previous month are at risk of forfeiture depending on the timing. Once the interest is paid on the 10th (business day) , it isn't forfeited.

But I may be wrong so if anyone thinks that interpretation is incorrect please post here.

AND also of note:

"Subscriptions into your Chip Smart Cash ISA will only count from the date that the payment settles in your Chip Smart
Cash ISA account and not the date it was authorised within the Chip app.!

So presumably there could also be a loss of interest for non working days if your deposit into the app falls on a non working day?

As I've said previously there is a workaround for the interest but only for those who are prepared to lose the ISA status on any deposited funds by withdrawing (not transferring) all but £1 (* NOT closing the ISA) and, if necessary depending on the withdrawal date, waiting for the previously accumulated interest to be paid *and then closing the account.

That only applies to those where an ongoing accumulation of an ISA balance tax year to tax year does not apply or is not important to the saver, for example if you were above the £1000 threshold and wanted to save in an ISA for a time period ending near to the end of a tax year, and re-invest in an ISA in the next tax year.

I decided it isn't worth the hassle for a small incremental amount of interest, and I certainly would not risk the larger loss of interest for a more substantial ISA balance.

What I don't understand here is what were Chip thinking when they introduced that term? Perhaps a representative from chip would like to explain? I think savers would think it perfectly reasonable that any cash which does not remain invested with one of the partner banks would not accrue interest, and perhaps that was the basis upon which they came up with the draconian term ( positing that maybe their systems are not sophisticated enough to track exact bank withdrawal dates?) but didn't they consider the reputational damage? As written, that term has caused a bad smell.

winkowinko

For a short period (a few weeks, perhaps a month or so) after they first launched the smart ISA, the clause was even worse. Interest was due yearly, and it stated that you would forfeit ALL interest if you transferred out within a year of opening the account.

The backlash was presumably so bad they had to do something about it, but then chose to settle on something only slightly less *hitty.

Tom_Hendo

I mean I understand the loyalty element they are aiming for, but for me I would expect it to be tied to the bonus rate or something rather than the full rate. And have an ability to take it out without loss of interest after a year (for example).

If the account was the same, but payment on 1st of the month I could NEARLY get around the terms. Even then because it's not electronic transfer of aiSA out, the date could be 15+ days and hard to fully arrange, and some providers won't accept it.

The rate nearly hooked me, but like quite a few on this chain, the cons outweigh the initial rate options, especially when assuming potential transfer outs at 3 or 6 or 12 months.

Onto the next options!