Consumers Confused About Cash ISA Interest Rates

Consumers are feeling confused about the interest rates earned by their cash ISA accounts, Money.co.uk is reporting.

Research by Money.co.uk has discovered that only 15% of cash ISA customers think their providers have been effective at advising them about changes to the interest rates earned by their cash ISA accounts.

This is of concern to consumers as 83% of cash ISA accounts opened during, or before, 2009 could be earning interest of 0.1% or less, Money.co.uk found.

There seems to be widespread ignorance about how cash ISA accounts work. For example, over 2 million consumers believe that transferring a cash ISA to another provider would “use up” their annual allowance moved to as . A further 3 million do not know how to transfer funds to different ISA porducts.

Money.co.uk has also found that only a fifth of consumers who hold ISA accounts keep a watch on their accounts to ensure that they remain competitive. Only 17% of respondents in the study have actually moved to a different ISA product to receive a better rate of interest.

Those consumers who do pay attention to the rates of return from their ISA accounts may be in for a shock as th eaverage return now stands at only 0.41%, a point emphasised by Chris Morling, MD of money.co.uk, who said:

“This confusion and perceived lack of information is a real problem as many of the cash ISAs that advertise ‘headline grabbing’ returns rely on introductory bonuses to temporarily inflate their rate. Once these come to an end, savers can find themselves unwittingly earning as little as 0.05%.

“The average return on cash ISAs now stands at 0.41% because so many have funds languishing in accounts paying so little in the way of interest. As Consumer Focus rightly pointed out, the current system just isn’t working.”