Chip app launches cash Isa paying a 4.75% rate – is it any good?

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A new instant access cash Isa account* has launched by the savings and investment app, Chip.

It pays a rate of 4.75 per cent and represents Chip’s first dip into the cash Isa market. Only a handful of providers are offering higher rates.

The account is fully flexible, allowing savers to instantly deposit and withdraw their money with no restrictions and without affecting their Isa allowance. 

A new instant access cash Isa product * has been launched today by the savings and investment app, Chip

All money deposited in Chip’s deal is held by ClearBank, and is eligible for Financial Services Compensation Scheme protection of up to £85,000 per person. 

This FSCS protection means savers’ cash is protected up to £85,000 per person if the firm fails. 

Chip’s app already offers a stocks and shares Isa and an instant access account which pays a slightly higher 4.84 per cent. 

Chip’s Isa account pays only 0.09 percentage points less interest than this standard instant access account.

But as it is an Isa, all interest earned on money held within the account – up to the annual Isa allowance of £20,000 – will be tax-free.

Someone putting £20,000 in Chip’s 4.84 per cent instant access account would earn £968 of interest in a year, compared to £950 of interest in its 4.75 per cent instant access Isa*.

While a basic rate taxpayer would not exceed their £1,000 annual tax-free savings allowance with a £20,000 deposit, a higher-rate taxpayer (someone earning £50,271 to £125,140 a year) would easily exceed their lower allowance of £500.

On £968 of annual interest, a higher rate taxpayer gets the first £500 tax free, but will be taxed at 40 per cent on the remaining £468, which means they would end up with £780.80 after tax.

Simon Rabin, chief executive of Chip, said: ‘This is a big moment for Chip and is the next step in our mission to become a trusted, one-stop destination for building wealth.

‘Rising interest rates have changed the landscape so our priority was to develop a product to give our users a tax-efficient way to get the most out of their money, with all of the convenience that they’ve come to expect from us.

‘We have a lot in store for 2024 and this launch is just the beginning.’

How does it compare to other tax-free deals?

While Chip’s new instant access Isa comfortably beats the average rate of 3.32 per cent, according to Moneyfacts, it is still beaten by 10 other cash Isa providers.

However, many of these come with a catch or two. 

For example, Coventry Building Society’s 5.05 per cent Four Access Isa limits savers to four free withdrawals a year.

Similarly, the MoneyBox 5.09 per cent cash Isa includes a bonus rate of 0.94 per cent for first 12 months, and limits savers to three free withdrawals a year. 

Another table-topping easy-access cash Isa deal is currently offered by Zopa Bank. 

Its cash Isa offers 5.08 per cent, which includes a 0.5 per cent bonus rate until 6 April.

> Check out the best cash Isa deals here

This post first appeared on Dailymail.co.uk