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6 of the best high interest current accounts

6 of the best high interest current accounts

Category: Banking
Author: Lieke Braadbaart
Date: 02/10/2018

Savings accounts used to be the only sensible place to put your hard-earned cash, but due to the effects of inflation, only four standard savings accounts currently stand a chance of offering a real return. Savvy savers will therefore be looking for 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 often boast far higher rates of interest than most savings accounts – especially if you're looking for easy access – and providers are actively competing for your business by offering a number of options and incentives.

As such, it's little wonder that these accounts are increasingly being 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. They're a lot like regular savings accounts in this way, but usually with higher limits and easier access.

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
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Co-op Bank

The Co-operative Bank

Current Account – with Everyday Rewards

0.00% AER
(but at least £4 per month)
  • Monthly funding requirement of £800 with at least four direct debits per month
  • No interest, but £4 (£5 gross) every month that funding requirements are met and the account is in credit (must have paperless statements and log into online or mobile banking at least once a month)
  • Earn 5p (up to £1.50 per month) every time you use your debit card
  • Arranged overdrafts are fee-free with a rate of 1.46% charged per month; unarranged overdrafts also come with a penalty of £10 per month (£10 per day if overdraft is increased)
  • Account can be managed via all channels (branch, phone, post, online, app and Post Office counters)

Proudly in first place sits The Co-operative Bank, which does not offer any interest, but does allow account holders to gain a maximum of £5.50 per month as long as they can manage to adhere to the account's funding requirements and are happy to bank online or via a mobile app. As the credit is not tied to any specific amount (above £800), this could be a great choice for those who don't know how much they'll manage to put away every month, especially if they use their card for most purchases.


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TSB

TSB

Classic Plus

5.00% AER

  • Monthly funding requirement of £500
  • 5% interest paid on balances of up to £1,500
  • Online banking and paperless statements required
  • Preferential remortgage terms
  • Interest and fee-free overdraft buffer of £10
  • Introductory arranged overdraft rate of 0% for three months (arranged overdrafts of £35+ 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 sits in second place, offering an attractive interest rate of 5.00% on balances of up to £1,500 – provided £500 is deposited each month and customers register for online banking and paperless statements. This may be enough to sway those reluctant to commit to TSB after their recent news coverage.

Keep in mind, though, that like most high interest accounts, it's been designed for those who stay in credit and comes with a fairly hefty rate on arranged overdrafts (after the introductory deal ends) as well as unarranged overdraft fees of up to £10 per day. Customers therefore need to be sure they can keep their balance topped up.


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Nationwide BS

Nationwide BS

FlexDirect - FundedGo to Site

5.00% AER

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

This account also comes with a generous benefits package, including a reward scheme and access to preferential rates on a variety of 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 unarranged overdraft fees reaching up to £5 per day.


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Halifax

Halifax

Reward Current Account - Funded

0.00%
AER

(but £3 cashback per month)

  • Regular funding requirement of £750 per month with a minimum of two monthly direct debit mandates and no overdraft usage
  • No interest, but it offers £3 cashback per month (£3.75 gross), provided the requirements are met and the account is kept in credit
  • Arranged overdrafts are interest-free but charged at 1p per day per £7 overdrawn; no fees for unarranged overdrafts
  • Get £75 cashback when switching accounts using the Current Account Switch Service (previous account must be closed)
  • Earn up to 15% cashback at selected retailers (as long as online banking is enabled) and additional cashback when arranging a direct debit subscription with participating retailers
  • Manage account by telephone, in branch, online, via smartphone app and at Post Office counters

The level of cashback on offer (£3 per month) means Halifax's deal works out as offering a top-four rate on the minimum funding amount of £750. The account also comes with extra incentives, including a generous cashback scheme and a switching incentive of £75 for those who use the Current Account Switch Service.

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, as at least two monthly direct debits need to be linked to it.


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Tesco Bank

Tesco Bank

Current Account - Funded

3.00% AER

  • Regular funding requirement of £750 per month with at least three monthly direct debit mandates
  • 3% interest paid on balances of up to £3,000, provided conditions are met, until 01.04.2019, whereby interest must be compounded
  • Tesco Clubcard points: two points earned for every £1 spent at Tesco or Tesco fuel (excluding Esso), one for every £8 spent elsewhere
  • Both arranged and unarranged overdrafts have an interest rate of 18.90% EAR
  • Account can be managed online, in branch, over the phone and by smartphone app

Taking fifth place is Tesco Bank, with an account that 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 the option to accrue Clubcard points that can be spent on a range of goods and services (1,000 points give £10 in Clubcard vouchers). It also doesn't charge a fee for overdrafts, though interest charges still apply.


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Nationwide BS

Nationwide BS

FlexPlus

Go to Site

3.00% AER

  • No minimum funding requirement
  • 3% interest paid on balances of up to £2,500
  • £13 monthly fee
  • Preferential terms for loans, credit cards and savings accounts
  • Earn cashback at selected retailers as well as discounts and deals through the Simply Rewards scheme
  • "Recommend a friend" scheme
  • Mobile phone insurance, vehicle breakdown 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 arranged overdrafts for three months (overdraft fee of up to 50p per day on amounts over £250 charged thereafter)
  • Unarranged overdraft fee 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 interest of 3% on balances of up to £2,500, although it comes with a monthly fee of £13. In exchange for this charge, customers will be able to get a generous package of features, including mobile phone insurance, travel insurance and vehicle breakdown cover, as well as the incentives offered with the previously mentioned Nationwide account.

Information and rates correct as at: 26.09.2018

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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