Why your next savings account should be a current account

As savings rates keep falling, it pays to look at current accounts for decent interest and access to your money

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Why your next savings account should be a current account

With saving rates at rock bottom, current accounts have become a haven for savers looking for a decent return on their cash. Not only do they pay up to 5% interest, but they also offer instant access to your money.

Here are the top accounts right now.

Nationwide

Nationwide offers a market leading rate of 5% on its FlexDirect current account.

The rate is fixed on balances up to £2,500 for the first 12 months, after this time the rate falls to a rate of 1% that is variable.

So in your first year you could pocket £125 from your savings.

Nationwide will allow you to hold one account in a sole name and one in a joint name, so you could double the amount earning 5% to £5,000 and potentially earn £250 from the pot.

In order to earn interest, you need to deposit at least £1,000 a month into the account, but you don't need to have any Direct Debits set up so it doesn't necessarily have to be your main account.

TSB

The TSB Classic Plus account also pays 5% credit interest but only on balances up to £2,000, which means you could earn up to £100 a year.

Unlike Nationwide the rate isn't set to drop after 12 months, however, this doesn't mean it won't change as the rate on the TSB account is variable.

TSB allows you to hold one account in a sole name and one account in a joint name so you could have two accounts earning 5% interest on £4,000 of savings and earn up to £200 a year.

In order to earn 5% interest, you need to pay in a minimum of £500 a month, register for internet banking and opt for paperless statements and correspondence.

Again you don't need to set up any Direct Debits on the account so it doesn't necessarily have to be your main account.

Lloyds Bank

The Club Lloyds Current Account pays tiered levels of interest.

You can get 1% variable on balances from £1, 2% on balances from £2,000 and 4% on balances between £4,000 and £5,000. With this account you could earn up to £200 in interest each year.

You need to set up two Direct Debits in order to earn interest and deposit at least £1,500 a month into the account each month or pay a £5 fee.

Lloyds will allow you to hold two accounts, one in a sole name and one in a joint name so there is potential to double up the amount you can earn 4% on to £10,000 meaning you could earn £400 a year.

The account also offers the choice of one of three lifestyle benefits including six free cinema tickets, an annual magazine subscription or an annual Gourmet Society membership.

Tesco

The Tesco Bank Current Account pays 3% variable credit interest on balances up to £3,000, which means you could earn a return of £90 a year from the account.

The great thing about this account is that you are allowed to open up two in a sole name or one in a sole name and another in a joint name, which means you can earn 3% on balances totalling £6,000 taking the interest you can pocket to £180 a year.

The account also offers a chance to boost your Clubcard points as you spend. You can get one Clubcard point for every £4 spent in a Tesco store and one Clubcard point for every £8 spent elsewhere.

Santander

The Santander 123 Current Account pays tiered levels of interest.

You can currently get 1% on balances from £1,000, 2% on balances from £2,000 and 3% on balances between £3,000 and £20,000. This has allowed savers to earn £600 a year.

However, from November Santander is introducing a flat rate of 1.5% on all balances up to £20,000. This will mean those with £20,000 will only be able to earn £300 a year. But that's still a decent amount for an account that allows you easy access to your money.

In order to earn interest, you will need to pay in £500 a month into your account and have at least two active Direct Debits.

Santander will allow you to open a 123 account in a sole name and one in a joint name so you could potentially earn 3% (1.5% from November) on a savings pot worth £40,000.

How to take advantage of high-interest accounts

High interest accounts often have a few hoops to jump through in order to earn interest, like a minimum deposit each month and a minimum number of active Direct Debits.

A good way to take advantage of high-interest current accounts is to have more than one and move your salary around each month to meet the criteria in order to earn interest.

If you had £4,5000 to put away for example, you could put £2,000 into a TSB Classic Plus and £2,500 into a Nationwide FlexDirect.

You would need to just make sure you either move £500 to the TSB account or £1,000 to the Nationwide account in order to satisfy the conditions for paying interest.

Over a year this distribution would earn you £225 altogether.

Compare current accounts