Moneybox boosts rate on its cash Isa to a best buy 5%

Products featured in this article are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. 

Savings deals offering 5 per cent are returning to the stage, weeks after disappearing.

Money app Moneybox has boosted its easy-access cash Isa deal to 5 per cent, nudging it to the top of the best buy table.

Yesterday, digital bank Chase raised its easy-access rate* to 5 per cent by adding a 1.5 per cent bonus to the account. 

The next best easy-access deal on This is Money’s Isa best buy tables pays 4.9 per cent, meaning Moneybox has now taken the top spot for the best buy when it comes to the highest rate. 

The move comes as the Bank of England voted to hold the base rate at 4.75 per cent yesterday. 

Moneybox’s 5 per cent easy-access Isa includes a bonus rate of 0.55 per cent for the first 12 months, meaning the Isa’s underlying rate is a variable 4.45 per cent.

The rate is rising from a variable 4.92 per cent.  

The account can only be opened by downloading Moneybox’s app with a minimum deposit of £500.

You can only make three free withdrawals in a 12 month period with this Isa. On a fourth withdrawal, the rate drops to 0.75 per cent. Which is lower than most high street banks. 

The number of withdrawals you can make resets on the date you opened your cash Isa.

If your Isa balance dips below £500, your rate will also drop to 0.75 per cent.

You can transfer in Isas you hold with other providers to Moneybox’s Isa. The interest is calculated daily and paid yearly.

This Isa is not a flexible Isa, so any money you withdraw from it cannot be replaced within the same tax year without affecting your £20,000 Isa allowance. You will lose whatever amount you withdraw from the allowance.

Money kept in Moneybox’s Isa is fully FSCS protected. Moneybox leans several banks to provide FSCS protection for its cash Isa. It says these banks can change over time but the banks it currently uses are:

• HSBC
• Santander UK
• National Westminster Bank
• Clydesdale Bank
• Bank of Scotland
• Lloyds Bank
• Qatar National Bank (Q.P.S.C.)
• First Abu Dhabi Bank P.J.S.C.
• National Bank of Kuwait (International)
• The Bank of New York Mellon, London Branch

The amount of money held with each bank can vary over time. Moneybox says it will never hold more than 50 per cent of the total funds with a single bank at any given time.

If you already have money in any of these banks, you’ll need to be careful not to breach the £85,000 limit if you put money away with Moneybox.

How does it compare to other top Isas?

While Moneybox is offering the highest rate for a cash Isa, the withdrawal restrictions will prove a drawback. 

For customers who want or need the freedom to dip into their savings more than three times in a 12 month period without interest rate penalties, Trading 212’s cash Isa* – while offering a slightly lower rate of 4.9 per cent- is a better option. 

Customers who open the Moneybox Isa need to be sure they won’t need to dip into their pot more than three times in 12 months and be careful that their savings not dip below £500 or risk their rate dropping to just 0.75 per cent.

Trading 212’s Isa is a flexible Isa which is a big benefit to savers with the financial fire power to max out their Isa limit each year. Moneybox’s Isa does not have this feature.

Monument Bank has a cash Isa which pays 4.76 per cent on deposits starting from £10,000. It does not have but the higher deposit amount of £10,000 will hinder new savers with smaller pots. Existing customers can open an Isa with deposits starting from £1. 

Like Trading 212’s deal, this Isa is a flexible Isa and can be opened on Monument Bank’s app.