A MAJOR app-based bank has launched a “market-leading” rate on one of its savings accounts.
Plum has bumped up the rate of its variable rate Cash ISA by 0.5 percentage points to 5.18%.
Cash ISAs are savings accounts where you can save up to £20,000 each year and don’t pay tax on any interest earned.
You can sign up for Plum’s Cash ISA via the online banks’ app which is downloadable off the Apple App Store or Google Play.
You can open one of the accounts with just £1, but bear in mind you’ll only get the 5.18% AER rate on balances of £100 or more.
AER, or Annual Equivalent Rate, shows you what you would earn in interest on any savings over the course of a year as a percentage.
If you make more than four withdrawals a year, the AER rate will drop to 2.5%.
Meanwhile, any interest you do earn is paid back monthly and you can only get the 5.18% interest rate if you are a new customer.
Plus, the 5.18% interest interest is only paid for the first 12 months after which point this drops by 1.37% gross.
So, if the interest rate at the end of the 12 month period was 5.16%, this would fall to 3.79%.
Caitlyn Eastell, from Moneyfactscompare.co.uk, said the rise on the Plum Cash ISA puts it in the “market-leading” position for its sector.
The next best Cash ISAs include Trading 212 and Moneybox’s accounts. We’ve got more details on that below.
Caitlyn added: “Those unfamiliar with Plum will find that they need to open the account via a mobile app, but once they do the account is quick and easy to manage.
“Savers can make regular payments into their pot, but in addition, Plum offers savers a top-up pocket that sits alongside their savings account which connects to a current account to make regular deposits on behalf of a customer.
“This is a great feature for those who want to save something each week but just don’t have the time to do so.
“This cash can easily be moved into the Cash ISA, or if its needed, back into someone’s current account.”
Plum bumping up the interest rate on its Cash ISA to 5.18% might make it market-leading, but there are some other accounts that might work better for you.
A Cash ISA that is AER variable means the interest rate is not guaranteed and can change over time.
Moneyfactscompare.co.uk said the next two best variable rate Cash ISAs in terms of interest rate are Trading212 and Moneybox’s accounts.
Trading 212 is offering a cash ISA at 5.17% AER variable, however this is falling to 4.9% from November 30.
Interest is paid daily while there are no withdrawal limits so you can take out cash whenever you want without a penalty.
Moneybox is next, offering 5.17% AER, but you need a minimum balance of £500 to get that rate.
If your balance is below this, a lower interest rate of 0.75% applies.
You can also only make up to three withdrawals every 12 months without impacting your rate.
The 5.17% rate is only in place for the first year too, after which it drops by 0.47 percentage points.
Remember, you can shop around for the best savings accounts by using price comparison sites like MoneySavingExpert.com, Moneyfactscompare or MoneySuperMarket.
If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.
Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what’s out there.
These websites let you tailor your searches to an account type that suits you.
There are three types of savings accounts fixed, easy access, and regular saver.
A fixed-rate savings account offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw but it comes with a hefty fee.
An easy-access account does what it says on the tin and usually allow unlimited cash withdrawals.
These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.
Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.
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