Money Insider: Santander and Halifax set the pace for ISAs

 

With the tax-year crossover a little under four weeks away, it's that time of year when many consumers start to pay closer attention to the interest rates on offer in the individual savings account (Isa) market.

Usually the window from early March through to the end of May is where the bank and building society marketing teams go into overdrive as they fight tooth and nail to cement a prized position in the best-buy tables.

However this year is very different, with Isa rates suffering a similar decline to those seen in the wider savings market due to the impact of the Government offering cheap money to providers via its Funding for Lending scheme.

Because the demand for savings balances has diminished, the usual fight to offer the top rates hasn't really materialised, although some better deals have come to light in the last few days.

Savers keen to get the best return on their tax-free cash will be heartened by the new cash Isas launched by Santander and Halifax this week.

The latest deals from Santander include an instant-access Isa paying 2.5 per cent and a two-year fixed rate at 2.8 per cent, both of which offer the flexibility and convenience of allowing customers to transfer in tax-free balances accumulated in previous years.

Similar to the two-year fixed-rate offer last year, Santander will pay an additional 0.1 per cent if Rory McIlroy wins a golfing major in the next two years. For existing or new customers with a Santander 123 credit card or current account, the two-year fix is offered at an enhanced rate of 3 per cent plus the 0.1 per cent McIlroy incentive.

If you're looking for a higher return then it will mean locking your cash up for a longer term, with the latest Isas from Halifax leading the way at 3 per cent for three years and 3.1 per cent for five years.

Despite the appearance of these better deals this week, rates still look poor in comparison with what was on the table 12 months ago, when it was possible to earn 3.3 per cent on an instant-access Isa, 3.7 per cent for a two-year fix and as high as 4.4 per cent if you were prepared to tie your funds up for five years.

Even though the lower returns have diminished, making full use of your annual, tax-free Isa allowance is still a smart move to make as it protects your funds from the taxman, not just for this year, but for years to come too.

Technology can keep you clear of unwanted bank charges

Anyone who has accidentally slipped into the red on their current account or exceeded their agreed overdraft limit will never forget the £20 or £30 rap on the knuckles from their bank for the oversight.

If you're constantly on the move and don't have the chance to check your account as often as you'd like, most banks offer a text alert service, where a message is sent to your phone showing a weekly mini-statement or when a large debit or credit appears on your account.

Lloyds TSB and Barclays are just a couple of the providers now offering this service for free as part of their mobile-banking applications, and you can also set up free text alerts for high balances, low balances and when you are getting close to your limit.

If you have a smartphone, you'll find that all the main banks offer a mobile banking option for your iPhone or BlackBerry. As long as you are already registered for online banking on your PC, you can opt for banking on your phone too. You can see the last few transactions on your account and make payments and transfers.

With your bank account at your fingertips, you can take a look at your balance or a make a transfer during some of your daily "dead" time – maybe on the train journey to or from work.

If you want to delve deeper and understand more about where your money is being spent, the Money Manager Service from Lloyds TSB enables you to do this. You can also see at a glance what payments are due to be made over the coming days or weeks – something that could help you stay out of the red.

Even if you only use those services on the odd occasion, it's worth signing up for, as it could help you avoid being clobbered with unwelcome bank charges.

Andrew Hagger is an independent personal finance analyst from moneycomms.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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