Plum boosts interest rate on Cash ISA to ‘excellent’ 5.01% | Personal Finance | Finance

Smart money app Plum has raised the interest on its easy access Cash ISA to a market-leading 5.01% – earning an “excellent” Moneyfacts rating.

Savers can launch the account with a £1 deposit and interest is paid monthly.

However, savers must invest at least £100 to receive the full 5.01% Annual Equivalent Rate (AER). This rate includes a 1.22% bonus for 12 months, after which the rate will drop.

Cash ISAs have become increasingly popular over the past years, with higher interest rates dragging more people into tax thresholds. These accounts allow people to save up to £20,000 a year tax-free.

Easy access accounts also provide savers with more flexibility to dip into their pots when needed – although some slightly restrict this. Plum’s account allows up to three withdrawals in one year without penalty. After the fourth, the interest rate will drop to 2.5%.

Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “This week, Plum has increased the rate paid on the £100 tier of its Plum Cash ISA.

“Now paying a market-leading rate of 5.01% AER / 4.94% gross and, as interest is paid monthly, it could be an attractive option for savers looking to boost their income.”

However, Ms Eastell pointed out: “It may be important to note that this rate includes a 1.20% gross bonus for 12 months, and savers will face a reduction in the interest rate paid if they make more than three withdrawals per year.

“Overall, this deal earns an Excellent Moneyfacts product rating.”

While Plum may be offering the top rate for easy access Cash ISAs, competition doesn’t fall to far behind.

Moneybox’s Cash ISA pays an AER of 5%, which includes a 0.55% bonus for 12 months.

Savers can launch the account with a minimum deposit of £500 and up to three withdrawals are permitted per year. The interest rate, which is paid on the anniversary of opening the account, will drop on the fourth withdrawal.

For savers looking for more flexibility, Trading212 offers an AER of 4.9% and unlimited withdrawals.

Savers need a minimum deposit of £1 to open the account and interest is paid daily.