ISA stands for Individual Savings Account, whilst it is possible to get other types of ISAs, the most common is the Standard Cash ISA and the account is purely cash based. The principle advantage behind choosing an ISA over a standard savings account is that it has tax-free status. This means that the interest that is generated is not taxed so you get more from your money.

Of course, the volume of interest that you will receive varies from ISA to ISA. Another thing that will affect the interest rate is the amount of your ISA allowance that you use. Under current legislation each person is allowed to invest £3,600 in a cash ISA every year, if you are using less than that amount, some ISAs may offer lower interest rates.

Regardless of which option you go for, an ISA will have a higher interest rate than a Savings Account though there may be conditions regarding Access. Cash ISAs with instant access tend to have lower interest rates, whilst fixed term access (generally over one year or more) ties up your money for the duration of the term, but often offers higher interest rates. These are a good idea if you’re happy not to access your money for a long period. Even with a fixed term ISA you can access your money before the end of the term, but you may be penalised via a loss of interest.

The vast majority of Cash ISAs will pay interest annually, usually at the end of the tax year. If you look around, however, it is possible to find accounts that pay monthly, quarterly or six monthly interest, it really does depend what you’re looking for. Some term products won’t pay out until the end of the term.

If you’re looking to make a little more return and are prepared to take more risks, Stocks and Shares ISAs invest on the stock market and thus can give you a greater return, although they can also return you less money than you originally invested. Some companies, such as Legal & General, also offer bonds ISAs which offer a greater return than a standard Cash ISA but also tend to have a fixed term. Have a look at the Legal & General ISA page for a good indication of just how many options there are for the prospective ISA investor. Generally speaking a Cash ISA is the best option if you are simply looking to make the most of your savings and minimise risk.