The best savings accounts for high monthly interest
If you have a decent lump sum of savings, you can use it to generate an income by going for an account that offers monthly interest.
Instead of interest being paid annually and compounded, these accounts allow you to transfer the interest that your savings earn each month into a nominated bank account. So you can spend what your pot earns without chipping away at your capital.
However, not all savings accounts come with a monthly interest option. We've rounded up the best deals on easy access, notice, fixed rate bonds and Cash ISAs as well as on current accounts and peer-to-peer websites.
You should bear in mind that these accounts are great if you are only interested in monthly income.
Easy access accounts
With an easy access account, you don't have to lock up your money. Here are the best easy access accounts that offer a monthly interest option.
Account | Interest rate AER | Minimum deposit | Maximum deposit |
1.55% | £100 | £1,000,0000 | |
ICICI HiSAVE Super Saver | 1.40% | £1 | No max |
*Rate falls to 0.75% if more than three withdrawals are made in a year.
Notice accounts
With a notice account you will need to give advance warning before you withdraw any of your savings. This sacrifice usually means you get a slightly better rate compared to an easy access deal. Here are the best rates you can get with notice accounts that have an option to pay monthly.
Account | Notice period | Interest rate AER | Minimum deposit | Maximum deposit |
Charter Savings Bank 100-Day Notice | 100 days | 1.80% | £1,000 | £250,000 |
Charter Savings Bank 95-Day Notice | 95 days | 1.65% | £1,000 | £250,000 |
Charter Savings Bank 60-Day Notice | 60 days | 1.55% | £1,000 | £250,000 |
Current accounts
Some current accounts pay decent levels of interest on deposits and pay out monthly too.
With the Nationwide FlexDirect account you can earn 5% interest on balances up to £2,500 for 12 months as long as you pay in £1,000 a month.
Or there's the TSB Classic Plus account which also pays 5% but on balances up to £2,000. The good thing about this account is the rate won't drop away after a year.
There's also the Lloyds Club Lloyds account which pays 4% on a balances between £4,000 and £5,000. You will need to make sure you pay in £1,500 a month to avoid the £5 a month fee though.
For larger balances there's the Santander 123 Current Account which pays 3% on balances between £3,000 and £20,000. The account comes with a £5 monthly fee.
Fixed rate bonds
Fixed rate bonds pay a set amount of interest, but you will have to lock up your capital for one or more years to get access to the rate. Here are the best deals over one, two, three and five years if you are looking for a monthly interest option.
One-year fixed rate bonds
Account | Interest rate AER | Minimum deposit | Maximum deposit |
RCI Bank One-Year Fixed Term Savings Account | 2.01% | £1,000 | £1,000,000 |
Charter Savings Bank One-Year Fixed Rate Bond | 1.81% | £1,000 | £250,000 |
Kent Reliance One-Year Fixed Rate Bond | 1.65% | £1 | £1,000,000 |
Two-year fixed rate bonds
Account | Interest rate AER | Minimum deposit | Maximum deposit |
RCI Bank Two-Year Fixed Term Savings Account | 2.25% | £1,000 | £1,000,000 |
Ikano Bank Two-Year Fixed | 2.15% | £1,000 | £1,000,000 |
Paragon Bank Two-Year Fixed Rate Account | 2.11% | £1,000 | £100,000 |
Three-year fixed rate bonds
Account | Interest rate AER | Minimum deposit | Maximum deposit |
RCI Bank Three-Year Fixed Term Savings Account | 2.60% | £1,000 | £1,000,000 |
Ikano Bank Three-Year Saver | 2.45% | £1,000 | £1,000,000 |
Principality Building Society Stadium Celebration Bond | 2.40% | £500 | £20,000 |
Five-year fixed rate bonds
Account | Interest rate AER | Minimum deposit | Maximum deposit |
FirstSave Five-Year Fixed Rate Bond | 3.06% | £5,000 | £2,000,000 |
State Bank of India Online Five-Year Fixed Term Deposit | 3.00% | £10,000 | £1,000,000 |
Paragon Bank Five-Year Fixed Rate | 3.00% | £1,000 | £100,000 |
Cash ISAs
With a Cash ISA you earn interest on your cash tax-free. You can save up to £15,240 in 2015/16. Here are the best deals across easy access and fixed rate bonds that offer to pay interest monthly.
Easy Access Cash ISAs
Account | Interest rate AER | Minimum deposit | Maximum deposit |
Virgin Money Defined Access ISA | 1.51% | £1 | Allowance for 2015/16 plus transfers |
Kent Reliance Cash ISA | 1.35% | £1,000 | Allowance for 2015/16 plus transfers |
Barnsley BS Triple Access Saver ISA | 1.35% | £100 | Allowance for 2015/16 plus transfers |
One-year fixed rate Cash ISA
Account | Interest rate AER | Minimum deposit | Maximum deposit |
Virgin Money Fixed Rate ISA | 1.50% | £1 | Allowance for 2015/16 plus transfers |
1.50% | £1,000 | Allowance for 2015/16 plus transfers | |
Kent Reliance Cash NISA One-Year Flexible Fixed Rate | 1.50% | £1,000 | Allowance for 2015/16 plus transfers |
Shawbrook Bank One-Year Fixed Rate Cash ISA Bond | 1.50% | £5,000 | Allowance for 2015/16 plus transfers |
Two-year fixed rate Cash ISA
Account | Interest rate AER | Minimum deposit | Maximum deposit |
Kent Reliance Cash NISA Two-Year Flexible Fixed Rate ISA | 1.85% | £1,000 | Allowance for 2015/16 plus transfers |
Shawbrook Bank Two-Year Fixed Rate Cash ISA | 1.85% | £5,000 | £250,000 |
1.75% | £1,000 | Allowance for 2015/16 plus transfers |
Three-year fixed rate Cash ISA
Account | Interest rate AER | Minimum deposit | Maximum deposit |
Shawbrook Bank Three-Year Fixed Rate Cash ISA | 2.10% | £5,000 | £250,000 |
Barnsley/Chelsea/Yorkshire Building Society Fixed Rate ISA | 1.90% | £100 | Allowance for 2015/16 plus transfers |
Five-year fixed rate Cash ISA
Account | Interest rate AER | Minimum deposit | Maximum deposit |
United Bank UK Five-Year Fixed Rate Cash ISA | 2.33% | £2,000 | Allowance for 2015/16 plus transfers |
Shawbrook Bank Five-Year Fixed Rate Cash ISA | 2.25% | £5,000 | Allowance for 2015/16 plus transfers |
Peer-to-peer savings
You could also try a peer-to-peer website.
These allow you to lend your money to other people that need to borrow for potentially higher returns. However, your money isn't protected by the Financial Services Compensation Scheme, which is where the risk comes in.
With RateSetter you will get equal monthly instalments of capital and interest. It offers the choice of earning a rate of 5.9% over five years, 4.6% over three years or 4.2% over one year. It also has a monthly account which pays 3.6%.
Lending Works is currently offering rates of 6.3% over five years and 4.7% over three years. You can choose to transfer the repayments of capital and interest you get from borrowers to your bank or just the interest in order to get a regular income.
Compare savings and ISA rates
