At one time savings accounts were the only sensible place to put your hard-earned cash if you wanted to generate a meaningful return, but unfortunately that's no longer the case. Savings rates are at record low levels with any returns being minimal unless you're willing to lock your money away, but what if there was an alternative? Well, there is – and high interest current accounts could be it.
High interest current accounts are exactly what they say on the tin – current accounts that offer high rates of interest on in-credit balances. Over the last year or two the current account market has become awash with these products, many of them offering impressive rates of interest, and although they tend to have certain requirements – a minimum funding level, for example, or a time limit on the interest deal – they could be a great solution.
There've been several accounts that have hit the headlines recently too, so here at Moneyfacts we've compiled the top 5 high interest current accounts on the market.
Halifax Reward Current Account
Penny says… "Although not technically a high interest account, the level of cashback offered (£5 per month) makes it work out as offering the best rate on the minimum funding amount of £750. The account must stay in credit for the monthly reward to be received and it must also be the customer's main bank account, with at least two monthly direct debits needing to be linked to it.
"However, as an added bonus the account also comes with extra incentives including a generous cashback scheme and a competitive introductory 0% overdraft period of 6 months (a usage fee applies of between £1 and £3 per day thereafter, or £5 per day for unauthorised overdrafts)."
TSB Classic Plus
Penny says… "The TSB Classic Plus account easily takes the second spot by paying an impressive 5.00% interest on balances up to £2,000. A small monthly funding amount of £500 is required, and customers will need to register for online banking and paperless statements to be eligible.
"Unlike some accounts there's no end date to the high interest deal, but it does come with a fairly heft interest rate on authorised overdrafts (after the first £25)."
Nationwide BS FlexDirect
Penny says… "In third place is Nationwide Building Society's FlexDirect bank account, also paying 5.00% but this time on balances up to £2,500. As an added bonus, customers won't need to pay any interest or fees for an authorised overdraft for the first 12 months.
"However, at least £1,000 must be paid into the account each month in order to qualify for this product, and the 5% rate is only paid for the first year the account is open, after which the interest rate drops to 1%."
Tesco Bank Current Account
Penny says… "A new entry to the top five is Tesco Bank, with its newly-launched current account offering a highly competitive 3% interest on in-credit balances up to £3,000.
"If the minimum monthly funding requirement of £750 is met then the fee will be waived, while the generous points scheme adds to the appeal – shoppers can earn 5 points for every £4 spent at Tesco, 3 points for every £4 spent on Tesco fuel and 1 point for every £8 spent elsewhere."
Bank of Scotland Classic with Vantage
Penny says… "Next up is Bank of Scotland's Classic with Vantage account, offering up to 3% interest depending on the balance which could make it a great choice for those who like to keep their account topped up.
"It offers additional flexibility of being operated via any channel, however it does come with a fairly high authorised overdraft rate after the initial £25."
Information & Rates correct as at: 13/06/2014
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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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