Could a current account be your easy access saver?

Category: Savings
Author: Leanne Macardle
Date: 27/11/2017

An easy access account should be in everyone's savings portfolio. They're the ideal place to store an emergency fund and can be a great way to slowly add to your savings pot as and when you can afford to, but unfortunately, they don't exactly offer the best rates. This is why it's time to think outside the box, and a high interest current account could be the perfect solution.

Why high interest over easy access?

High interest current accounts offer the best of both worlds - high interest rates and instant access to your cash! They currently offer far better rates than traditional savings accounts (up to 5%, in fact) and you don't even need to lock your money away, which means they can comfortably beat fixed rate bonds as well. Essentially, you can use a high interest current account as a top-paying easy access saver, letting you add to and withdraw from your pot whenever you wish - or if you've already got a lump sum to invest, you can benefit there, too.

However, the main drawback will come if you've got a particularly large savings pot, as most high interest current accounts only give you the headline interest rate up to a certain balance. This means that if you've got more than a few thousand pounds to squirrel away, you may need to get a bit creative in how you split your funds (see below), but if you've got a small savings pot then a high interest current account is certainly worth considering.

Could it really make a difference?

Yes! You only need to look at the rates paid on easy access deals compared with high interest current accounts to see how much of a difference it could make, but if you need more convincing, we've got a few calculations for you.

Let's say you put £2,500 in the top-paying easy access savings account, which currently comes from Paragon Bank and pays 1.31%, giving you interest of £32.75 over the first year. Alternatively, you could put the same £2,500 in Nationwide's FlexDirect current account paying an impressive 5% and earn £125 over the same 12-month period, meaning you get a fantastic £92.25 more in interest!

If you've got a bigger savings pot and are saving with your partner, you could earn even more - Nationwide's terms and conditions stipulate that you can have one individual account as well as an account under joint names, so if you both have an account each and a joint one between you, you could squirrel away £7,500 and earn £375 in interest after the first year. That's a pretty tidy sum in the current savings environment!

Get organised and beat the system

Even if you're saving on your own, there are ways by which you can save more in high interest current accounts, provided you're willing to jump through a few hoops. These accounts tend to have a lot of requirements that you'll need to painstakingly stick to in order to be eligible for the interest rate, with direct debits and minimum funding requirements often being key.

But these can be easily achieved with a bit of careful management. After all, there's nothing to stop you from opening several high interest current accounts with different providers and splitting your various direct debit commitments between them, and from there you can set up standing orders to move funds into each account at set times to ensure you meet the minimum funding requirements as well.

Granted, this can be a tricky way of doing things, but once you've set everything up it should all run smoothly – just keep an eye on the accounts to make sure everything's transferring correctly, but ideally, it should be a slick and automatic process.

Find the best high interest 'savings' accounts for your needs

High interest current accounts really can be the perfect place to store that emergency fund, or for those just getting into the savings habit, with the combination of great rates and flexibility making them the ideal home for your savings. Here are a few of the best deals available to get you started.

Nationwide comfortably wins in terms of savings rate, with the 5% offer being impossible to beat anywhere else on the high street (unless you've got a regular savings account with your main banking provider, but these tend to have more restrictions). Just bear in mind that you'll need to pay in at least £1,000 a month, and be prepared to reconsider the deal in a year's time, as the 5% deal only lasts for 12 months.

TSB may offer a slightly lower interest rate than Nationwide, but if you're willing to use the account as your main current account as well as a home for your savings, you could earn even more: the 3% interest rate on balances up to £1,500 can give you £45 in the first year, and if you combine that with the potential £10 in extra cashback per month, you've got £165 - or even £225 if you make the most of the linked credit card as well (provided you pay off the balance in full each month, of course).

This may not technically be a high interest account as it doesn't provide in-credit interest, but it does offer £3 cashback per month (provided the conditions are met), as well as £75 cashback if you completely switch accounts, which works out as £111 after the first year.

Rates and information correct as at 27.11.2017