Tesco halts new accounts; other high-interest bank options

Following Tesco Bank's decision to stop accepting new current account customers, we look at alternatives you might to consider if you want decent interest.

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Tesco halts new accounts; other high-interest bank options

With rates at rock bottom, current accounts paying high levels of credit interest have become a haven for savers looking for a decent return on their cash.

However, rates on high-interest current accounts are mostly variable so aren't guaranteed to be around forever.

In light of interest rate cuts from banking giants such as Santander, TSB and Lloyds, Tesco Bank said it would keep offering 3% on its current account until 2019. However, due to an influx of applications, the bank had to freeze out new customers just nine days after the announcement. It is unclear when applications will re-open, but Tesco Bank said it will inform customers when they do.

No one is sure what else is going to happen but these are the best deals to take advantage of before they are cut or disappear.

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 triple the amount earning 5% to £7,500 and potentially earn £375 from the pot.

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 pays 3% credit interest but only on balances up to £1,500, which means you could earn up to £45 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 couples could potentially earn 3% on £4,500 spread across three accounts, which would generate £67.50 of interest in a year.

To earn 3% interest, you need to pay in a minimum of £500 a month, register for internet banking and opt for paperless statements and correspondence.

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

Apply for a TSB Classic Plus account today

Bank of Scotland

If you take out a Bank of Scotland Current Account with Vantage you can earn tiered levels of interest.

You can get 1.5% on balances up to from £1 up to £999.99, 2% on balances from £1,000 to £2,999.99 and 3% on balances between £3,000 and £5,000. So you could earn £150 from the account each year.

Bank of Scotland's terms and conditions state: 'You can have a maximum of three accounts with Vantage'. So you could potentially have £15,000 split between three accounts earning 3%, which means you could pocket £450 in a year.

However, in order to earn interest you will need to deposit at least £1,000 a month into an account and have two Direct Debits set up so that might be tricky to do on three accounts.

Lloyds Bank

The Club Lloyds Current Account now pays a flat rate of interest.

You can get 2% variable on balances from £1 up to £5,000. With this account, you could earn up to £100 in interest each year.

You need to set up two Direct Debits to earn interest and deposit at least £1,500 a month into the account each month or pay a £3 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 earn 2% on to £15,000 spread across three accounts allowing you to earn £300 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.

Santander

The Santander 123 Current Account now pays a flat rate of interest.

You can get 1.5% on balances up to £20,000, which means you could earn up to £300 in a year. But that's still a decent amount for an account that allows you easy access to your money.

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 a couple could potentially earn 1.5% on a savings totalling £60,000 spread over three accounts, which amounts to £900 a year.

However, the account attracts a £5 monthly fee to consider.

Apply for a Santander 123 Current Account today

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 to earn interest.

Compare current accounts and see if you could get a better deal