The accounts paying most interest on your cash

High street savings accounts are still not the top places for your money.

Updated: 

Savings

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

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.

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