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Current accounts take the lead in rate race

Current accounts take the lead in rate race

Category: Banking

Updated: 27/11/2017
First Published: 26/03/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you're struggling to find a savings account that pays an eye-catching rate, the rather surprising news is that it might be time to consider a new current account.

That's because a few weeks ago, Nationwide raised the interest rate on its FlexDirect current account to 5.00% AER – getting on for double the amount paid on some of the best savings accounts at present.

The rate certainly cannot be ignored, but there is some hoop-jumping to be done to secure it and other considerations to take into account too.

The over-riding pre-requisite is that £1,000 must be deposited into the account each month to get the rate of 5.00%.

This is then only paid on balances up to £2,500 and for the first year. After a year the rate drops to 1%, while no interest is paid at all in any month where less than £1,000 is deposited.

Obviously, you cannot expect to get something for nothing, hence the funding requirements and limit on the amount on which the high rate is paid, but it is certainly an account worth considering.

The same can be said for Santander's 123 current account which, unlike Nationwide's FlexDirect, charges a monthly fee (of £2).

The 123 account pays 1% AER on balances above £1,000, 2% when you hit £2,000 and 3% at £3,000, up to a maximum of £20,000.

It is also not just a one year promotion, and while the headline rates might be lower, there is another way to boost your return: cashback is paid on household bills when at least two eligible direct debits are set up from the account.

A lower monthly contribution of £500 is required, with a minimum balance of £1,000 being needed to get the advertised interest rates.

What Next?

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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 Any products featured may be withdrawn by their provider or changed at any time.