Abbey and Alliance & Leicester have increased the interest rates on their current account offerings to 6% AER.

The Santander-owned banks will offer the in-credit rates to customers of Abbey current account and Alliance & Leicester’s Premier Direct and Premier 50 accounts for 12 months from Monday 8 June.

Gillian Almond, current account manager at Abbey and Alliance & Leicester, says: "We continue to buck the trend in the current account market by providing even better value at a time when many other providers have reduced the rate they pay to customers with balances to as low as 0%.”

Andrew Hagger, spokesman for Moneynet.co.uk, says the rate changes mean Abbey and Alliance & Leicester offer the most competitive returns on the high street. However, you’ll only earn 6% for 12 months – after this time, the in-credit rate on both deals reverts to just 1% on balances under £2,500.

In addition, to qualify for the 6% interest rate you must pay in at least £1,000 a month into Abbey’s current account or £500 into Alliance & Leicester’s offering.

Hagger recommends people consider Halifax’s Reward current account, especially if they don’t tend to keep much money in their current account. In return for paying in £1,000 each month, Halifax will pay you £5 a month (or £60 a year) irrespective of your balance.  
 


”If you only keep an average credit balance of say £500 in your account over a year, you’d need to find a credit interest rate of 15% in order to accrue a net annual interest payment of £60,” Hagger explains.

HSBC, meanwhile, has reduced the rate on its Plus current account by 2% - meaning it pays 0% regardless of your balance.

Louise Bond, personal finance manager at uSwitch.com, says: “As Santander does the decent thing by increasing in-credit interest rates, HSBC cuts rates by 2% AER for all Plus customers. This account now offers consumers an in-credit interest rate of 0% across all tiers."

HSBC's Plus account is a packaged deal, and costs £9.95 for the first three months and £12.96 thereafter. It includes travel insurance, breakdown cover, life cover and identity theft protection.

"If all of these benefits are utilised, it could still be a good deal for some people," adds Bond.

Other current accounts

• overdraft fees
• current accounts