Beware of the ISA bonus rate if you're slow to switch

Andrew Hagger of Moneynet.co.uk looks at the financial implications if you don't switch your ISA balance when the bonus on your chosen account expires.

The ISA market has been a hot bed of activity for the past three weeks with providers clambering for those important best buy places in the hope it will drive large amounts of business as we approach the tax year crossover.

There's not a huge difference between the headline rates, with 0.35% separating the top five instant access ISAs, however it's a different matter when you look at the bonus element of these accounts which can vary quite widely.

At one end of the scale the bonus on the Barclays Golden ISA 3 is just 1.00% whereas with the latest deals from Santander and Halifax it accounts for a very hefty 2.80% and 2.50% respectively of the overall rate.

If you are on the ball and manage to switch your ISA as soon as the bonus expires then it's no problem, however if you delay your decision, the accounts with the big bonus rates will suddenly turn sour and offer you a much poorer return on your cash.

The table below shows the interest you can earn for 12 months on the current best buys, but also highlights the impact of the bonus in each case if you were to leave your balance in the account for a further two months.

You can see that the bonus structure of an ISA is important as if you don't move your cash promptly it can undo your efforts of trying to secure a best buy rate. The longer you delay your switch the worse it becomes.

When you open your ISA, or any other savings account for that matter, make a note in your diary or your iPhone/Ipad a couple of weeks before your rate is due to plummet so you're in a position to move your cash before the interest return drops to a derisory level.