The best instant access savings accounts

An instant access savings account (otherwise known as an ISA) allows UK bank customers to save up to £10,680 into an account, which is credited with interest each year. Since this interest is exempt from tax, the most profitable instant savings accounts are the ones that offer the highest interest rates. The main benefit of an ISA is that it allows customers to withdraw funds whenever they need. They can also extend their allowance each year and money can be transferred to new ISA accounts that offer higher interest rates.

Santander currently offers one of the best instant access savings accounts for customers. With a guaranteed interest rate of 3.3 percent for 12 months, it is 2.8 percent more than the base rate set by the Bank of England. It is ideal for children's accounts and parents may consider transferring their funds from the account after the guaranteed period. The company providing the best interest rate on the market is the AA, which offers a variable rate of 3.35 percent. The difference between the AA and Santander is that the AA does not guarantee an interest rate above the base rate. However, if the base rate stays frozen in the future then investing in an AA ISA could be a smart move.

Lastly, it is important to remember that an ISA will not generate a significant amount of profit this year. Customers are also advised to avoid ISA accounts that have fixed terms of more than 12 months. This is because the ISA rates are predicted to change in 2012. Therefore, people should make sure they have plenty of flexibility to change their accounts when rates begin to increase.

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