Fixed rate vs variable rate cash ISAs

When you open a cash ISA with Principality you can choose from two interest rate options; fixed rate and variable rate.

Choosing which suits you depends on what matters to you when it comes to your savings. 

Understanding the difference between fixed and variable rate cash ISAs can help you decide which option feels right for you.

Fixed rate cash ISAs

With a fixed rate cash ISA, your interest rate stays the same for a set amount of time.  

You can't withdraw your money; it's locked away until the end of the fixed term. And closing the account may mean you have to pay a fee or lose out on interest. 

These accounts may suit people who don't expect to need access to their savings.

The idea is you pay in a lump sum of money, usually over a short space of time. Then leave that money untouched, earning interest, until the account matures.

Because your rate is fixed, you'll know exactly how much interest your savings will earn over the agreed term. (As long as you don't close your account early).

Variable rate cash ISAs

With a variable rate cash ISA, your interest rate could go up or down. Many variable accounts let you access your savings. But there could be withdrawal limits, so check the T&Cs.

As well as having more flexibilty of access, you can usually continue to pay money into variable cash ISAs. (Unlike fixed rate cash ISAs where you have a limited time to add money in).

These accounts may suit you if you value access over knowing how much interest you'll earn. Although your interest rate can change over time, variable rate cash ISAs often provide greater flexibility if you think you may need access to your savings.

Choosing between a fixed or variable ISA

A fixed rate cash ISA could suit you if you:

• Want certainty. 
• Can leave your savings untouched. 
• Are saving for a longer-term goal. 
• Have a lump sum to save.

You might prefer a variable rate cash ISA if you:

• Want easier access. 
• Expect your savings needs to change. 
• Prefer greater flexibility. 
• Want to keep adding money in over time.

Questions to help you decide

Before choosing a cash ISA, consider:
•    When will I need my money? 
•    Am I comfortable locking funds away? 
•    Am I comfortable if my interest rate changes? 
•    Is certainty about the rate more important to me than flexibility? 
•    Am I saving for a short or long-term goal? 

Choosing an account that fits your savings habits can help you get more from your cash ISA.

Whether you're looking for the certainty of a fixed rate or the flexibility of easier access, exploring the different types of cash ISAs can help you find the option that best matches your savings goals.