NatWest e-ISA: Doesn’t Pay Full Rate Immediately

Written by Karen Bryan

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I’m looking for a new high interest home for my Cash ISA savings. The bonus on my Halifax ISA Direct Saver, which paid 3.2% with no penalties for withdrawals, expired this month. I transferred the money to a Halifax ISA Online Saver, which is currently paying 3% (2.75% fixed rate bonus + 0.25% variable), with no penalties for withdrawals. I’m not keen to tie the money up for a few years in a fixed rate Cash ISA account, so I’m looking to better that 3% rate.

At first glance, the NatWest e-ISA looked attractive, paying 3.5% for balances of £30,000+ consisting of a variable underlying rate of 2.5% + a 12 month variable rate bonus of 1%. ( Update June 2012 – NatWest appear to have reduced the rate to 2.5% for balances over £30.000.) However that bonus isn’t paid until the 15th of the month after the opening of the account, so my money would only earn 2.5% interest until the bonus date kicked in. I should’ve known better, after a recent examination of the  NatWest Fixed Rate Cash ISA  revealed that it didn’t pay the headline rate of interest as soon as your money hit the account.

If I then factor in the loss of interest during the transfer period, plus the fact that the NatWest rate of interest is variable, I’m starting to wonder if I’d really be much worse off leaving the money in the Halifax Online Saver, which at least guarantees me a 2.75% return. The other alternative is to transfer my Cash ISA pot to a Santander Direct ISA Issue 9 which is currently offering a 3.3% variable rate, including a 12 month bonus.

Oh my goodness, why do UK banking products have to be so full of tripwires? It’s already hard enough trying to decide whether to tie your money up to get a higher fixed rate of interest with the uncertainty over when interest rates will increase, without adding such misleading headline rates of interest.

 

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