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6 of the best high interest current accounts

6 of the best high interest current accounts

Category: Banking

Updated: 15/06/2017
First Published: 14/06/2017

At one time, savings accounts were the only sensible place to put your hard-earned cash, but thanks to rising inflation, it's becoming increasingly difficult to secure a meaningful return. As a result, many savers are looking to alternatives - and a high interest current account could be it.

High interest current accounts are exactly as advertised - 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 currently tend to boast far higher rates of interest than offered by most 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 and incentives.

As such, it's little wonder that these accounts are starting to be used as a savings vehicle, but they do have some downsides. 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 seeing rate cuts, too, though 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.

AER
Details

TSB
TSB Classic Plus

3.00% AER
  • Monthly funding of £500 required
  • 3% interest paid on balances up to £1,500.99
  • Get £5 cashback per month when 20 debit card payments are made, and an additional £5 when two or more direct debit mandates are held
  • Eligible for a linked credit card which offers 1% cashback on the first £500 of eligible purchases each month
  • Preferential mortgage terms
  • Online banking and paperless statements required
  • Interest and fee-free overdraft buffer of £10
  • Introductory authorised overdraft rate of 0% for three months (authorised overdrafts of £25+ charged at 19.84% EAR with a £6 monthly usage fee thereafter)
  • Manage account by telephone, in branch, online, via smartphone app and at Post Office counters

The TSB Classic Plus account holds steady at the top of the charts, with not only an attractive interest rate of 3.00% on balances of up to (almost) £1,501, provided £500 is deposited each month and customers register for online banking and paperless statements, but also the possibility of receiving cashback each month, and other benefits.

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.


AER
Details

Halifax
Halifax Reward Current Account - Funded

0.00% AER

(but £3 cashback per month)

  • Regular funding of £750 per month required
  • Two monthly direct debit mandates must be held
  • Authorised overdraft fee of £1 per day up to £1,999.99, £2 up to £2,999.99 and £3 over (£5 per day for unauthorised overdrafts)
  • Get £75 cashback when switching accounts using the Current Account Switching Service (previous account must be closed)
  • Earn up to 15% cashback at selected retailers (as long as online banking is enabled)
  • Preferential mortgage terms and travel money deals
  • Manage account by telephone, in branch, online, via smartphone app, and at Post Office counters

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.

As is common among high interest current accounts, 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.


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Details

Nationwide
FlexDirect - Funded

Go to Site

5.00% AER

  • Regular funding requirement of £1,000 per month
  • 5% interest paid on balances up to £2,500 for 12 months (1% thereafter)
  • Preferential terms for mortgages, loans, credit cards and savings accounts
  • Earn cashback of up to 35% at selected retailers as well as discounts and deals through the Simply Rewards scheme
  • "Recommend a friend" scheme and discounted car insurance
  • Manage account by post, phone, online, via smartphone app and in Post Office branches
  • Introductory offer of 0% interest on authorised overdrafts for 12 months (overdraft fee of up to 50p per day charged thereafter)
  • Unauthorised overdraft rate of up to £5 per day

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 in 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.


AER
Details

Tesco Bank
Tesco Bank Current Account - Funded

3.00% AER

  • Regular funding requirement of £750 per month
  • Three monthly direct debit mandates must be held
  • 3% interest paid on balances up to £3,000
  • Tesco Clubcard points: 2 earned for every £1 spent at Tesco or Tesco fuel (excluding Esso), 1 for every £8 spent on card purchases outside Tesco
  • Only available in England, Scotland and Wales
  • Both authorised and unauthorised overdrafts have an interest rate of 18.90% EAR
  • Account can be managed online, in branch, over the phone and by smartphone app

Jumping into fourth place is this account from Tesco Bank, which offers 3% interest on in-credit balances of up to £3,000, as long as £750 is paid into the account every month and a minimum of three direct debits are held.

It comes with great benefits especially for loyal Tesco customers, with Clubcard points to spend on all sorts of things (1,000 points give £10 in Clubcard vouchers), and does not charge a fee for overdrafts, though interest charges still apply.


AER
Details

Nationwide
FlexPlus

Go to Site

3.00% AER

  • No minimum funding requirement
  • 3% interest paid on balances of up to £2,500
  • £10 monthly fee
  • Preferential terms for mortgages, loans, credit cards and savings accounts
  • Earn cashback of up to 35% at selected retailers as well as discounts and deals through the Simply Rewards scheme
  • "Recommend a friend" scheme and discounted car insurance
  • Identity theft help, mobile phone insurance, vehicle breakdown cover, extended warranties, card loss cover and worldwide travel insurance
  • Account can be managed via all channels (branch, phone, post, online, app and Post Office counters)
  • Introductory offer of 0% interest on authorised overdrafts for three months (overdraft fee of up to 50p per day charged thereafter
  • Unauthorised overdraft rate of up to £5 per day

Nationwide has secured a second entry in the charts with its FlexPlus current account. Unusually, it has no minimum funding requirement and still pays cashback of 3% on balances of up to £2,500, although it comes with a monthly fee of £10.

In exchange for the monthly charge, however, customers will be able to get a generous package of features, including mobile phone insurance, travel insurance, vehicle breakdown cover and extended warranties, as well as the incentives offered with the previously mentioned Nationwide account.


AER
Details

Bank of Scotland
Classic - with Vantage

2.00% AER

  • Monthly funding requirement of £1,000 with two direct debits per month
  • 2% interest paid on balances from £1 to £5,000
  • Eligible for Everyday Offers scheme
  • Preferential terms on mortgages and currency
  • Earn up to 15% cashback at selected retailers (must be registered for online banking to qualify)
  • Authorised overdraft rate of 19.89% EAR on amounts of £25.01+ with a £6 monthly usage fee
  • Additional unauthorised charges of up to £10 per day and a 19.89% overdraft rate
  • Account can be managed via all channels (branch, phone, post, online, app and Post Office counters)
  • Account can be managed via all channels (branch, phone, post, online, app and Post Office counters)

Bank of Scotland's Classic with Vantage account just squeezes into the top six by offering 2% 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.

Information & Rates correct as at: 14/06/2017

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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