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Cash ISA

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sophie_1003 | 09:25 Wed 02nd Jun 2010 | Business & Finance
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I invest in a cash ISA, am I guaranteed to get back the amount of money I invest?
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Yes unless the interest rate is negative (will never happen) or the whole banking system collapses.
But of course if the rate of interest paid is less than the rate of inflation you will get back less in real terms than you put in.
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What do you mean by 'real terms'? I just got a bit worried by the whole BP situation.
ell if you put in £1000 now at 2% pa interest now you would get back £1020 in a year's time.
£1000 might buy you 2000 tins of beans now, But if beans go up in price by 4% the 2000 tins would cost you £1040. So in a year from now your ISA pot of £1020 would only buy you 1961 tins of beans
Question Author
Ah I see! That's fine, as long as I don't put in £1000 and only get £500 back I don't mind too much! Thanks for the help!
a cash ISA is exactly what it say on he tin, cash! Not shares. You will earn some interest but tiny. I don't think rates will go negative but it did happen in Japan once.
One thing is worth noting

A lot of providers of ISA's tempt people in with a ' bonus ' rate of interest , which is only payable for the first year .

For example they may advertise a rate of 3.5 % - BUT 2% of that is only payable for the first year - after that the rate falls to 1.5 % .

Therefore after the first year , it is important to see what rate is available elsewhere , and transfer your ISA to a different provider offering a better rate .
For more info on ISAs see Martin Lewis' excellent website which llists the current best deals around.(look under saving)
http://www.moneysavingexpert.com/
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Thanks for all the answers! Was looking for a better deal a while ago but because of the credit crunch they were all offering very similar to what I already had! Maybe worth looking again though.

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