In order to be able to pay a high rate of credit interest on their current accounts, the majority of providers limit the amount on which they will pay the high rate at around £2.5K. On any balance over this, the rate drops significantly, usually to a miserly 0.10%.
As a result, customers who like to keep a high credit balance in their current account are penalised.
Lloyds TSB is looking to tempt such customers by launching an addition to existing current accounts known as 'vantage' which pays 4.89% gross (5% AER) on balances of between £5K and £7K.
Unfortunately this will only appeal to a limited number of consumers as the rates above £7K and below £5K are much less competitive.
For those customers who like to keep all their money in on place, theCoventry BS First account currently pays 5.46% gross (5.6% AER) on balances up to £250K. This rate includes a 0.85% AER bonus for 12 months and the AER (including bonus) is guaranteed to pay 0.60% AER above Bank of England Base Rate.
Those customers who are happy not to have all their money in one place can get the best deal. The Alliance & Leicester Premier Direct Current Account pays 8.19% gross (8.5% AER) on balances up to £2.5K.
Any further money can be transferred to a top paying savings account. Depending on how you like to manage your account you can obtain rates over 6.50%. Customers can still have instant access to their money, either by visiting their local branch, transferring the money online or by using a cashcard.
As market conditions remain tough, institutions will come up with ever more innovative ideas to lure customers and their money away from their competitors.
With the majority of institutions offering switcher services, it has never been easier to transfer your current account. Shop around and make sure you get the best account to suit your needs. An account paying a high rate of credit interest is all well and good, but it won't be much use if your continually in the red.
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 Any products featured may be withdrawn by their provider or changed at any time.
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