Many countries now seem to be firmly in recovery from the economic turmoil of recent years, and the term “credit crunch” seems to be finally disappearing from the news. But some things have still yet to recover. In particular, many banks still offer much lower rates of interest than they have done in previous years before the financial crisis. With such low interest rates, many are starting to wonder if there is any point keeping savings in ISAs or other forms of savings account anymore. However, there are some steps you can take to maximise the returns you get through interest.
Consider a Stocks and Shares ISA
Cash ISAs are basically standard savings accounts with no tax on interest. With a stocks and shares ISA, on the other hand, your money is put into investments instead. The reason for this is that it will often bring better returns than a cash ISA, sometimes significantly better. You can deposit money into a stocks and shares ISA, or transfer existing shares you own so that they become part of the ISA. Another advantage is that your full yearly tax-free savings allowance can be put into a stocks and shares ISA, while only half of it can go into a cash ISA. This means you might want to consider dividing your money between both types. However, stocks and shares ISAs are not for everybody. They are more complicated to use effectively, and come with an element of risk. The value of investments can go down as well as up.
Use Standard Savings Accounts
Alongside and ISA, many people have a standard savings account that they simply ignore. If this applies to you, it might be time to make use of it again. Perhaps it was opened automatically alongside a current account some years ago, or perhaps it’s the account you used to use before you opened your ISA and then never got around to closing. Either way, if you find you have more savings than you can deposit in your ISA through the year it is worth putting the excess in the standard savings account. The interest rate is still noticeably higher than that of a current account. It can also be a good holding place for funds you intend to put in your ISA, but aren’t depositing yet in case you need to withdraw them again and harm your annual limit.
Regularly Check the Market
Some people are loyal to a particular bank that offers great customer service or a good range of options. There is nothing wrong with that, but it doesn’t apply to the majority. If they’re honest, most people aren’t fiercely dedicated to the bank they use. Interest rates change all the time, so it is a good idea to regularly check the market. Every year or two, shop around and see if you could get better rates from changing to a different bank.