Last Friday, I received a letter from the Nationwide Building Society advising me that as from October, the interest rate of my cash ISA was dropping from 1.5% to 1.25% – well, it was good of them to let me know as it meant I could do something about it.
I’ve needed to sort out my cash ISA for a long time – I’ve been using it as an ‘extension’ to my emergency funds account – paying off holidays, unexpected expenses etc, so it’s not a true long term savings account and consequently, there’s not a lot in there, only around £5k.
Around £3k of that has been ear-marked to pay off my car loan next year.
My cash savings need to be somewhere where I can’t touch it – my previous cash ISAs have always been easy-access accounts so it was time I found a fixed rate account to tie up my money for a few years (Task 1), with the money to pay off my car loan being kept separately (Task 2).
So on Saturday, I closed the Nationwide ISA online, transferred £2k into my current account and moved the rest into my actual emergency funds account (a Nationwide limited access account which pays 1% net interest). The cash to pay off my loan is now separate from my savings – Task 2 completed!
I then did a quick search of fixed rate ISAs, found a decent one with Skipton Building Society paying 2.75% for 5 years which could be opened and managed online (quite a few accounts with other banks/building societies could only be opened at branch only) and transferred the £2k from my current account to open the account. Task 1 completed!
The whole process from start to finish took about 15 minutes!
Low Fixed Rates
It’s possible that I’ve not made the best choice getting this fixed rate and that it may not even be the best deal out there. 2.75% is a bit better than other rates available now but might be absolutely rubbish when (not if) interest rates go up, as they are supposedly about to any time now so I could end up losing over the next few years.
Still, the main thing was that I needed to start locking away some money so I can’t dip into it and that’s what I’ve done now.
Anyway, all this pushes me to start managing my emergency funds account better – it’s taken a battering these past couple of years (just sorted out my Christmas plans so another chunk has come out of it!) and I need to start building it up again.