Savings accounts have long been thought of as a safe, sensible place to put your hard-earned cash in order to generate a decent return. However, times have changed and with interest rates only ever seeming to be edging downwards a lot of savvy savers are looking for alternatives.
Well, why not consider current accounts?
A combination of factors have led to the dilemma savers now find themselves in, with base rate and the Government's Funding for Lending Scheme (FLS) being largely to blame. Base rate has been at its record low level for almost five years, while the FLS, which gave banks and building societies access to cheap loans in order to boost lending, means banks no longer need our cash to balance their books.
This means the interest rates offered are paltry – there's simply no need for them to compete for your cash or offer you a decent rate, and that means a lot of savers are left with dismal returns on their investment. In some cases they're not receiving any growth at all, with inflation and the taxman eating away at any meagre interest.
Current accounts, however, are a different story. Some are offering impressive credit interest rates of up to 5%, far outweighing anything the savings market can offer – currently, the average interest rate on no notice accounts is a meagre 0.64%, with ISAs faring only slightly better at 1.45%.
With savings rates being so dire a lot of banks and building societies are capitalising on the opportunity to snap up weary savers, and the launch of the Current Account Switch Guarantee – where customers can switch accounts in seven days or less – means banks need to up their game even more to attract (and keep) their customers.
A lot of current accounts now offer a viable alternative for savers hungry for a decent interest rate, and with many offering the addition of exclusive deals, discounts and special rates on other financial products it makes a lot of sense to see what's out there.
Of course, we're not suggesting that you give up on savings accounts altogether. The various restrictions on some of these high-interest current accounts means a lot of people will simply want the option to squirrel away cash as it suits them, and the reassurance of keeping savings separate from everyday cash could also appeal.
Plus, some people might want the certainty of being able to tie their money up for a considerable length of time in return for a fixed interest rate, and ardent investors might like to generate income from their hard-earned savings with monthly interest accounts being the preferred option.
Then, of course, there are ISAs, and even those lured in by the prospect of current accounts would be wise to benefit from the tax-free nature of an ISA.
For a lot of people, the best option would be to go for a combination. Savers that are looking to generate the best returns on their money would do well to consider some of the high-interest current accounts around at the moment, but having the likes of an ISA shouldn't be overlooked either.
Compare current accounts to find one that could boost your income
Check out our pick of the best savings deals
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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