At one time, savings accounts were the only sensible place to put your hard-earned cash if you wanted a meaningful return, but while fixed bond rates have been edging up recently, they're still far lower than years gone by. What if you wanted even better rates without needing to lock your money away? A high interest current account could be the solution.
High interest current accounts are exactly what they say on the tin - current accounts that offer high rates of interest on in-credit balances. These accounts could be perfect for those seeking a decent return as they often boast far higher rates of interest than many savings accounts, especially if you're looking for easy access, and providers are actively competing for your business by offering a growing number of options
As such, it's little wonder that these accounts are starting to be used for saving, but they're not necessarily ideal. They tend to have certain requirements, such as a minimum monthly funding amount, a time limit on the interest deal and - more often than not - an upper limit on the balance that they'll pay interest on. Many of these accounts are also having their rates cut, too, but they still offer better rates than can be achieved elsewhere, offering a viable alternative to savings accounts.
So, if you're looking for an alternative for at least a portion of your savings, and don't mind a bit of active management, these accounts could be a great solution. We've compiled the top six high interest current accounts on the market (based on a typical account balance of £1,000) to help you find the one that's right for you.
TSB Classic Plus
The TSB Classic Plus account has just stormed to the top of the charts with the announcement that it's adding a cash incentive to its package, as well as an impressive in-credit interest rate. The account pays 3.00% interest on balances of up to (almost) £1,501, provided £500 is deposited each month and customers register for online banking and paperless statements.
Additionally, it now also offers £5 cashback per month provided 20 debit card payments are made, and an additional £5/month if a minimum of two direct debits are held. It also comes with extra benefits, including preferential mortgage terms, currency and eligibility for a linked cashback credit card. However, like most high interest accounts, it's been designed for those who stay in credit and comes with a fairly hefty rate on authorised overdrafts (after the introductory deal ends) as well as unauthorised overdraft fees of up to £10 per day. Customers therefore need to be sure they can keep their balance topped up.
Halifax Reward Current Account - Funded
Despite this not technically being a high interest account, the level of cashback offered (£3 per month) means Halifax's deal works out as offering the second-best rate on the minimum funding amount of £750. The account also comes with extra incentives, including a generous cashback scheme.
However, customers should note that the account must stay in credit for the monthly reward to be received, and it should ideally be the customer's main bank account, with at least two monthly direct debits needing to be linked to it. Furthermore, an overdraft usage fee of between £1 and £3 per day will be applied (or £5 per day for unauthorised overdrafts), so it may not be suitable if you regularly dip into the red.
Nationwide FlexDirect - Funded
Nationwide Building Society's FlexDirect bank account easily makes the top three by paying an impressive 5.00% interest on balances of up to £2,500 for the first 12 months. As an added bonus, customers won't need to pay any interest or fees on authorised overdrafts over the same period.
This account also comes with a generous benefits package, including discounted car insurance, a reward scheme and access to preferential rates on a variety of other financial products. However, at least £1,000 must be paid into the account each month and the 5% rate is only paid for the first year, after which it drops to 1%. Overdraft charges are again fairly high, with unauthorised overdraft fees reaching up to £5 per day/£60 per month.
Nationwide has secured a second entry in the charts with its FlexPlus current account. Unusually, it has no minimum funding requirement and still pays interest of 3% on balances of up to £2,500, although it comes with a monthly fee of £10.
However, customers will be able to get a generous package of features in return for the monthly charge, including mobile phone insurance, travel insurance, vehicle breakdown cover and extended warranties, as well as the incentives offered with the previously mentioned Nationwide account.
Bank of Scotland Classic - with Vantage
Bank of Scotland's Classic with Vantage account secures a top-five spot by offering up to 3% interest on certain balances, which could make it a great choice for those who like to keep their account topped up.
The account offers the additional flexibility of being operable via any channel, while the generous cashback scheme and preferential terms on other financial products further add to its appeal. However, it again comes with a fairly high authorised overdraft rate and monthly fee, while unauthorised charges can reach up to £10 per day (after a £10 fee-free overdraft buffer), so customers will need to budget carefully.
Lloyds Bank Club Lloyds
Just making it into the top six is this account from Lloyds Bank, which offers 2% interest on in-credit balances of up to £5,000, and a monthly fee of £3 that's waived if £1,500 is deposited each month.
It has a fantastic selection of additional benefits, aside from the interest, including preferential terms on a range of financial products, together with cashback deals and a yearly Lifestyle Benefit, which could make it appealing to those who want something extra from their current account. However, the benefits will again need to be weighed up against the high overdraft rate (once the introductory period has come to an end), which on the plus side is only payable on authorised overdrafts of £100 and above (unauthorised overdrafts have a buffer of just £10).
Information & Rates correct as at: 02/03/2017
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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