Current accounts V ISAs

Everyone loves to save money here and there, whether it’s for that holiday you have been dreaming of or just putting some pennies away for a rainy day.

However, each banking provider offers different terms and conditions, so check out our handy guide to find out which saving option is best for you.

How can I save with a current account?

Current accounts are less restricting than ISAs, which means you can access your money when you need it.

Many banking providers offer different current accounts, with some even offering travel insurance when you bank with them.

If you don’t have an agreed overdraft on a current account, you’ll be able to put your money in and no fees will be charged. This way, you’ll be able to build up your finances without unexpected charges being made to your account.

With the new Current Account Switching Service, providers have begun to offer competitive interest rates on some of their banking products. If you’re looking to earn interest on top of your finances, you can choose to open an account which offers this. However, these types of current accounts require a minimum sum of money going in on a monthly basis. In most cases, this amount is around £1,000. If you’re able to credit your account with this amount, you could benefit from saving with this product.

How can I save with an ISA?

ISAs are the most traditional accounts to use when saving money, but have many restrictions when it comes to withdrawing finances if you need it in an emergency.

Fixed-rate ISAs mean you will be unable to touch the money you have put into your account. You can choose from one-year to five-year plans, but make sure you can financially afford to not have the money back for that duration. If you opt to save up your money in a fixed-rate ISA, you will find interest rates are higher than easy access accounts.

Easy access ISAs are flexible when it comes to withdrawing money. If you find yourself in need of an instant cash boost, you’ll be able to enter your savings whenever you like. However, if your savings are reduced to a certain level, you may miss out on the interest.

Most banks and building societies let you open an ISA with just £1, but if you want to reap the benefits of higher interest rates, contributing more money each month can make a huge difference.

Once again, banking providers are always looking to offer the best interest rates, so it’s always useful to shop around to see who has the best deal for you.

Can I have both a current account and ISA?

Yes. Most people who save have both a current account they use for daily withdrawals and an ISA to build up their finances.

Even saving a small amount of money each month can benefit you in future, whether it an ‘in case of an emergency fund’ or you’re saving up for that dream car.

To veer away from spending your savings, we recommend choosing a fixed-rate ISA and enjoying it a few years later.

If you decide to save through a current account, be careful not to over spend or take out an overdraft. In doing this, you’re losing money in charges and overdraft interest rates can be extortionate. However, if you remain in credit you can expect to benefit from your banking provider’s rates. Remember to shop around for the best current accounts available, as interest rates change frequently. 

Category: BankingMoney

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