Keep it current – use a bank account to maximise your savings

24 October 2017
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While rates have nudged up recently, it is still hard to get a good return on savings you may need to access it in an emergency. The average easy-access savings account pays just 0.37%, according to research by Savings Champion.

For those with smaller savings pots, current accounts can be a better place to save. Providers are offering rates of up to 5% on their current accounts, so many consumers are saving here instead. A Moneywise poll of 781 readers in October found that 66% use one or more current accounts to boost their savings.

Current accounts often have more Ts&Cs than a bond or savings account, such as minimum pay-ins or direct debts to set up, but the perks usually outweigh the effort.

The highest rate of interest is offered by the Nationwide FlexDirect account. This pays 5% interest on balances up to £2,500, although this is just a 12-month introductory offer. It then drops to 1%, so consider switching at that point.

To get the top interest rate, you’ll need to pay in at least £1,000 a month, but there are free agreed overdrafts on offer for the first year. You’ll also be able to open the linked Nationwide Flexclusive Regular Saver, which pays 5%.

The Tesco Bank Current Account pays 3% interest on balances up to £3,000 and has guaranteed to maintain this rate of interest until 1 April 2019. Users must deposit at least £750 and pay out at least three direct debits each month.

It also rewards debit card spending with Clubcard points. You earn one point for every £1 spent in Tesco, plus one point for every £8 spent elsewhere.

A 3% interest rate is also offered by the TSB Classic Plus account, but only on balances up to £1,500. To get this rate, you’ll need to pay in at least £500 a month, register for online banking, plus opt in for paperless bank statements and correspondence. New customers also earn £5 cashback every month if they have two active direct debits, plus another £5 cashback for spending with their debit card 20 times a month. This cashback offer ends on 30 June 2018.

For higher balances, the Bank of Scotland Vantage account pays 2% interest on balances up to £5,000 if users pay in £1,000 each month, stay in credit and pay out at least two direct debits. To get this interest rate, open a current account with the bank and request its Vantage add-on.

Lloyds Bank’s Club Lloyds account also pays 2% interest on balances up to £5,000. You must have two direct debits set up and pay £1,500 into the account every month. But beware the £3 monthly fee if you do not meet the minimum pay-in level. Account holders can get perks such as six cinema tickets or Gourmet Society membership.

For those with bigger savings, the Santander 123 Current Account is Moneywise’s Best Buy. It pays 1.5% interest, but is available on balances up to £20,000. It comes with a £5 monthly fee and cashback on household and utility bills.

This requires at least a £500 monthly pay-in and two direct debits. Account holders can open Santander’s 123 Regular eSaver, offering 5% for the first 12 months.

Featured product

Virgin Money Essential Current Account If you’ve suffered with bad credit or persistent debt in the past and aren’t eligible for a current account, then you may need to open a basic bank account. These accounts offer few bells and whistles, but give people the chance to rebuild their finances. My Moneywise Best Buy is the Virgin Money Essential Current Account.

While most basic accounts pay no interest at all, this pays 0.75% on balances up to £100,000. It offers limited online access and it must be opened in a Virgin Money branch, but no minimum monthly pay-ins or direct debits are required.

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