Why wait? Take advantage of attractive ISA rates now!

Savers should get their skates on to benefit from bumper returns from Cash ISAs (individual savings accounts). Banks and building societies are falling over each other to offer the best rates in years in an effort to attract funding as the credit crunch bites. And with the cash ISA allowance rising from £3,000 to £3,600 this tax year, it makes sense to slot away as much as you can in one of these accounts.

Cash ISAs keep some of your hard-earned cash out of reach of the taxman, paying interest tax free. The current combination of high rates and an increased allowance is great news for savers, while borrowers are seeing their purse-strings stretched as lenders pull the most attractive loan rates and tighten their criteria.

The high ISA rates, of as much as 6.5% AER on instant access cash ISAs and 6.15% AER on fixed rate ISAs, are on offer despite the Bank of England slashing the base rate to 5% this month. This makes it even more crucial to take advantage of these interest rates while they last. After all, they might not be around in coming months, as interest rates far above the base rate won't be sustainable over the long-term - so act immediately to secure the best deals.

Check ISA terms and conditions

But before squirreling away your cash in one of these tax free accounts, you must check the terms and conditions to ensure it's the right one for you. For starters, will you need access to the money? If the sum is to act as your 'emergency fund' - which independent financial advisers (IFAs) recommend should equate to around three months' salary - it makes sense to choose an instant access account. You never know when you might need the cash, which is particularly the case as conditions get tougher for consumers in the tempestuous financial climate.

Topping the tables at time of writing (21 April 200) is Barclays' Tax-haven ISA, paying 6.5% AER but you can't transfer existing Cash ISA funds into this account. If you've already got money stashed away elsewhere, then compare the accounts that ask for you to give notice before withdrawing your money, as this may give you greater returns. Scarborough Building Society is offering a Cash ISA, paying 6.3% AER with 30 days notice to access your cash.

Keep the taxman's hands off your savings! Find the Cash ISA that is right for you.

Consider the bonus

Another important question to ask is does the account include a bonus rate? For example, the Barclays ISA includes a bonus of one percentage point for 12 months - so it's important to make a note in your diary to check if it's still competitive once this period ends. Many savers will be seeking an account with online access. So, if you're a fan of sorting out your finances in cyberspace, make sure you choose an account with this facility. There are still some smaller providers which only operate over the phone and by post.

The good news is that the web-savvy generation often have access to the best deals, as these tend to be the internet accounts where statements are viewable online. This enables the provider to cut costs as they don't have to send out paper statements - a saving which they can pass on to the saver.

21 April 2008 © Moneyextra.com

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