The accounts paying most interest on your cash


Looking for the best return on your cash, but don't want too much risk?

It's well worth looking beyond high street savings accounts to the likes of current accounts and peer-to-peer websites.

Let's look at all of these and more to see what rates are on offer.

Instant access savings accounts

The top rate of interest on an easy access account is currently 1.50% from BM Savings and new player RCI Bank. The RCI account can be opened with £100 and has no bonus, while the BM rate includes a 1% bonus for 12 months and can be opened with £1,000.

Notice accounts

By giving up access to your cash for 120 days, you can earn a rate of 1.90% from Charter Savings Bank. The account can be opened with £1,000.

If you don't want to lock your money away for that long, you can get 1.65% with the 95-Day Notice Account or 1.55% with the 60-Day Notice Account, also both from Charter Savings Bank, again with a minimum deposit of £1,000.

Cash ISAs

If you haven't used your annual tax-free cash ISA allowance (now £15,240), this arguably should be the first place you turn, unless you're a non-taxpayer.

Disappointingly, short-term ISA rates have been falling in the past couple of months and some top ISAs have been closed, but there is a new player causing a stir in the shape of the international arm of India's Punjab National Bank.

Its Variable Rate Cash ISA pays a top easy access rate of 2%, and you only need a pound to open an account.

In addition the bank's whole fixed rate ISA range are also best buys and can be opened with £1,000. The one-year deal pays 1.9%, the two-year 2.15%, the three-year 2.3%, the four-year 2.5% and the five-year fixed rate offers a top return of 2.7%. You'll need to act quickly though as these rates are set to drop from 10th August.

Fixed rate bonds

The top one-year bond come from Charter Savings Bank, paying 2% over 12 months on balances over £1,000.

Al Rayan Bank is best over two years, paying 2.32% on balances from £1,000, and tops the three-year bond table too with a rate of 2.63%, again with a minimum deposit of £2,000.

Vanquis Bank offers the top rate over four years, paying 2.61% on deposits from £1,000. Vanquis is also top for five-year bonds with a rate of 3.01%, again on £1,000+

Secure Trust Bank is best over seven years, paying 3.11%, followed closely by FirstSave which offers a return of 3.10% over the same period, both with a minimum deposit of £1,000.

Current accounts

Current accounts continue to trump all the top savings accounts at the moment, for smaller balances anyway.

TSB's Classic Plus account pays 5% permanently on balances of up to £2,000, providing you credit the account with £500 a month.

Nationwide's FlexDirect account pays 5% interest on balances up to £2,500 for the first 12 months. The only condition is you need to pay in at least £1,000 a month.

Lloyds Bank is offering the Club Lloyds account, which pays 4% on balances between £4,000 and £5,000, providing you credit the account with £1,500 a month and set up two direct debits from it.

If you don't want to move your money around, Santander's 123 account pays 1% on balances over £1,000, 2% on balances over £2,000 and 3% on balances from £3,000 to £20,000. You need to pay in £500 a month, and set up at least two direct debits. There's also a £2 a month fee on the account but you can earn cashback on some of your direct debits for household bills.

Tesco Bank's current account also pays 3%, but only up to £3,000. You need to pay in at least £750 a month or you'll face a £5 monthly fee.

And Bank of Scotland's Classic Account with Vantage pays 3% on balances of between £3,000 and £5,000 so long as you pay in £1,000 a month. You can have up to three accounts too.

Compare current accounts


Peer-to-peer websites allow you to lend money to other people and potentially earn a greater reward for your risk.

However, your interest isn't tax free and your money isn't protected by the Financial Services Compensation Scheme, which is where the risk comes in.

RateSetter's five-year income account is paying an average rate of 6.9% over five years.

Lending Works is currently offering rates of 6.2% over five years and 5.1% over three years, while Zopa is averaging 5% over five years or 4% over three years.

If you don't want to lock your money up for as long, all of these companies offer shorter lending periods, albeit with lower interest rates.

You could also look at the likes of Landbay, which lends money to buy-to-let property landlords, and Wellesley & Co., which is currently promising a 7% return on a five-year bond to fund the expansion of its business, with interest paid twice a year. It's also offering 6% over three years.

What to choose?

The account you go for will probably be determined by the amount you have to save, your attitude to risk and whether you want instant access to your money.

What's clear though is that if you want a better return on your money in the longer term, with a bit more risk in some cases, you're better off looking beyond traditional savings accounts right now.

Unfortunately, if you just want somewhere to put some money away in case of a rainy day, you're not going to be able to beat inflation unless you go for peer-to-peer savings. If you don't fancy that, you should still shop around for the best rate you can get.

10 things your bank doesn't want you to know
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The accounts paying most interest on your cash
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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