Savers looking for a new Cash ISA are being warned not to rely on headline interest rates after new analysis found two-thirds of leading easy access accounts come with restrictions or temporary bonus rates.
Research commissioned by savings app Spring found only 33 of the top 100 Easy Access Cash ISAs could be described as "clean" accounts with no short-term bonus, limits on withdrawals or other restrictions. Almost half - 47 per cent - restrict how many withdrawals customers can make, despite being marketed as easy access accounts.
Another 16 per cent include a temporary bonus in the advertised interest rate, meaning savers could see their return fall once the introductory period ends. The average interest rate across the 100 accounts analysed was 3.69 per cent.
Where the restrictions are found
Moneycomms analysed the top 100 Easy Access Cash ISAs on July 27 and 28 on behalf of Spring. It found accounts without restrictions were particularly difficult to find towards the top of the market.
Only three of the top 10 accounts had no bonus rates, withdrawal limits or other restrictions. Of the top 20 accounts, eight - 40 per cent - included a short-term bonus rate.
Across all 100 accounts, 16 per cent offered a temporary bonus, with the additional rate worth 1.64 per cent on average. These bonuses typically lasted for 12 months.
Another nine per cent of accounts had other conditions attached, such as requiring customers to hold a current account with the same provider. This means a Cash ISA appearing near the top of a best-buy table may not necessarily provide the same interest rate indefinitely or offer unrestricted access to savings.
What savers should check before opening a Cash ISA
Derek Sprawling, head of money at Spring, said people choosing an easy access account were likely to consider the ability to withdraw their savings when needed an important part of their decision. He said: "Our analysis shows that savers need to look beyond the headline rate.
"Almost half of the top 100 Easy Access Cash ISAs restrict how often customers can withdraw their money, while others rely on temporary bonuses or require customers to meet additional conditions."
Mr Sprawling said savers should establish whether an advertised interest rate includes a temporary bonus and find out what the rate will become once it expires. They should also check how many withdrawals are permitted and whether eligibility depends on holding another financial product with the provider.
He added: "A competitive headline rate can be attractive, but savers should understand what sits behind it."
Why bonus rates matter
A temporary bonus can increase the interest paid when an account is first opened, but the overall rate may fall substantially when it expires. This means customers who leave their savings in the same account could receive a lower return after the introductory period unless they move their money elsewhere.
Withdrawal restrictions can also vary between providers, making it important to check the terms of an account rather than assuming "easy access" means money can be withdrawn as often as required without affecting the interest rate.
Andrew Hagger, personal finance expert at Moneycomms, said: "ISA customers should be careful not to plump for an account just because it's near the top of the best buy tables." He added that closer inspection could reveal that "the rate is boosted by a temporary bonus or there are restrictions on the number of withdrawals they can make".
Interest earned within a Cash ISA is tax-free and does not count towards an individual's Personal Savings Allowance. The annual ISA allowance is currently £20,000, which can be spread across different types of ISA during the tax year.
Savers considering switching should also be careful about how they move existing ISA savings. Rather than simply withdrawing the money themselves, they should normally use the official ISA transfer process through the new provider to preserve the money's tax-free ISA status.
