This week's best current accounts

Interest rates on savings accounts are so low that more people are turning to their current accounts to grow their savings. 

If you keep your balance in credit they can deliver bumper returns, but some heavily penalise overdrawn customers, so if you frequently have a low balance it’s better to opt for an account that offers cheaper agreed borrowing.

Many others offer attractive up-front offers to tempt you into switching. There’s normally a couple hoops to jump through, but if it’s very easy to do through the Current Account Switching Service, and returns can be lucrative.

Around a million people switched current account last year. There's never been a better time to do it, with several banks offering to pay you £100+ to join. 

Each week Moneywise will be bringing you the best of what the current account market has to offer.

Find the best current account for you

In-credit interest

Nationwide’s FlexDirect account pays 5% interest on balances of up to £2,500. However, that’s an introductory 12-month offer and when it ends the rate drops to just 1% interest on the first £2,500. Agreed overdrafts are free for the first year.  You’ll need to pay in at least £1,000 a month.

Alternatively, the TSB Classic Plus account will pay 5% interest on balances up to £2,000, but the rate is going to be slashed in the new year. You’ll need to pay in at least £500 a month, register for internet banking, opt for bank statements and paperless correspondence to get the bonus rate, and there’s a linked regular savings account paying 5% too. It's still worth considering for the other perks. 

The Santander 123 Current Account pays 3% interest on balances between £3,000 and £20,000, 2% on balances between £2,000 and £3,000 and 1% on balances between £1,000 and £2,000. However, Santander has announced it’ll halve the top interest rate in November to 1.5%. There’s some respite as the rate is paid on any balance between £1 and £20,000. There’s a £5 monthly fee, but also very generous cashback on household and utility bills.

The Halifax Reward Account could prove better value for smaller balances, providing you stay in the black. It pays £5 a month every month, but this will fall to £3 a month early next year, you don’t go overdrawn. This reward is treated as an ‘annual payment’ by the taxman, instead of interest, which means the tax is paid by Halifax at source, at the £60 a year won’t go towards your personal savings allowance. Go into the red and you’ll be charged £1 every day you’re in your overdraft. If this looks like the account for you, don’t get one before reading about the introductory offer.

Best introductory offers

The Co-operative Bank is offering £150 to new customers who join via the Current Account Switching Service. The deal only applies to standard and premium accounts, not basic or student accounts. To be eligible, you must not have claimed a switched bonus from either company before, and you must not be an existing customer (defined as current account customers depositing £800+ a month).

Elsewhere. M&S Bank will give a £100 M&S gift card to new current account customers, plus a £10 voucher each month for a year, providing you pay in at least £1,000 a month. That's worth a little more than the Co-op deal, but only if you're an M&S shopper. You’ll need to switch your account and transfer two monthly direct debits to qualify. The deal is available on M&S’s free standard account, or its £10 a month Premium Account.

First Direct's 1st account  will pay you £100 cash if you switch to one of its current accounts. First Direct will also pay you another £100 if you are unhappy with the service and leave after the first six months. To qualify, you’ll need to transfer via the Current Account Switching service and deposit at least £1,000 in the first three months.

Halifax will pay £100 to anyone who switches to its Current AccountReward Current Account or Ultimate Reward Account. The latter charges a £10 monthly fee, or £15 if you pay in less than £750 per month. You’ll need to sign up via the Current Account Switching Service and set up at least four direct debits.

Best authorised overdrafts

Interest on the First Direct 1st Account is charged at 15.9% AER, with the first £250 interest-free. It costs £1.01 to be overdrawn by £500 for ten days, and £9.09 to be overdrawn by £1,000 for 30 days. 

M&S Bank’s Current Account has an interest-free £100 overdraft. Go further into the red and you’ll be charged 15.9% APR. You’ll pay 30p to be overdrawn by £250 for five days a month, and £1.62 if you’re overdrawn by £500 for ten days a month.

Best for customer service

Picking the right bank isn’t just about getting the highest interest rate, or lowest overdraft fees. Service is equally important.

That’s why our Customer Service Awards look at the companies readers trust the most each year.

The 2016 Awards, which consider the views of 24,000 readers, show that Metro Bank is the most trusted current account provider in the UK in 2016. It’s readers scored it 4.9 / 5 for trust, narrowly beating First Direct, which has also consistently scored well over the years.

Nationwide, TSB and Santander complete the top five in that order, with customers swayed by high-interest deals.

Almost half of Moneywise readers have switched their current account provider to get a better deal or better service – is it time for you to join them? 

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Your Comments

I've been with Santander since they took over A&L and only stay because of the interest I get from my 123 account. The customer service I've had is not good.