Plug into currents and beat savings accounts

It's hard to be a saver, but some great interest rates can be found where you least expect them. By Chiara Cavaglieri and Julian Knight

These are strange financial times. Inflation is above target yet mortgage rates are at near record lows. The economy is sluggish but the stockmarket is going through a bull run. And here, perhaps, is the strangest phenomena of all: you can now get a higher rate of return on your current-account cash than you can with a standard-savings account.

There is major competition in the current-account space with new rules introduced to ensure seven-day switching but next to none in the savings space, so if you're looking to make your money work hard, getting the right account can be highly rewarding.

Not only are there cash incentives and other perks, but several current accounts are offering market-leading interest rates on in-credit balances. In fact, the average no-notice savings account is paying a paltry 0.67 per cent, according to, while the average current-account credit interest is a far more appealing 1.19 per cent.

Anna Bowes, director of says: "Savvy savers will utilise all the weapons in their armoury from cash Isas (individual savings accounts) to high-interest current accounts and regular savings accounts, in order to cream as much extra interest as possible. Saving in the current environment isn't easy and being complacent can cost you dearly, so it's worth juggling your money and considering the best-paying accounts you can find."

Nationwide's FlexDirect current account, for example, pays an impressive 5 per cent on balances up to £2,500 in year one, falling to 1 per cent thereafter. You must pay in at least £1,000 per month to be eligible, and if you can't pay in the required £1,000 you won't receive any interest that month (calculated on the last day of the month and paid the next day, minus any tax). The current best buy for instant-access savings – the Post Office Online Saver – pays a mere 1.50 per cent AER, which doesn't even come close to protecting suffering savers against inflation.

The Lloyds Classic Account with Vantage is one of few accounts to start paying interest on balances as low as £1 – balances up to £1,000 earn 1.5 per cent interest, rising to 2 per cent on £1,000 to £3,000 with the full 3 per cent payable on balances of £3,000 to £5,000. Interest rates apply to the whole balance so if you have £4,000 in your account you earn 3 per cent on the lot.

Again, if you go into the red at all you miss out on interest for that entire month, although there is a £10 overdraft buffer with both this and the Nationwide account.

It isn't very likely that you would be able to maintain a balance of over £5,000 for an entire year, but in theory you could earn £150 in interest per year (before tax) with the Lloyds account. Similarly, the maximum potential pay out with Nationwide (5 per cent on £2,500) would still be a very attractive £125.

Santander's 123 account is another contender. It does carry a monthly fee of £2, but it offers tiered rates starting at 1 per cent on balances from £1,000, 2 per cent on £2,000 to £3,000 and 3 per cent on balances between £3,000 and £20,000. Interest is calculated daily so if your balance falls below £1,000 on any given day of the month you don't earn any interest for that day.

"Nationwide BS gets plaudits for its 5 per cent rate, but remember this is only for the first year. Santander 123 is the winner for balances over £5k as it's the only one paying credit interest at this level," says Andrew Hagger, personal finance analyst at

The 123 account goes one better offering monthly cashback (again ranging from 1 to 3 per cent and paid directly into your account) on your direct-debit bills for mortgage payments, council tax, utilities and TV/broadband packages. You need to set up at least two direct debits and you must pay in at least £500 every month to be eligible, but you can share the account with a partner and put both your salaries in.

The Halifax Reward current account will even give you an impressive £100 switching incentive and an ongoing £5 per month as long as you pay in at least £750 a month and use your account to pay for two direct debits (the £5 reward is only available if you remain in credit).

From the end of September, online Halifax bank customers will also be able to earn up to 15 per cent cashback on spending in various stores including Morrisons, Argos and Homebase under its Cashback Extras scheme.

There are current accounts that give you access to headline-grabbing savings accounts including the First Direct 1st Account. Not only do you get a £125 bonus for switching (you must pay in at least £1,000 per month) and a bank with an outstanding customer-service record, but as a current-account customer you can access their Regular Saver paying an appealing 6 per cent. You are restricted to saving £25 to £300 per month but this can still add up – if you put the maximum £300 per month for the whole year you would earn around £117 (£93 net).

All of these perks are appealing of course, but there is not one bank account that suits everybody. If you regularly rely on an overdraft, in-credit interest rates are of little relevance so concentrate on fees and charges as any rewards will easily be cancelled out if you get stung by overdraft charges.

"These accounts have been tailored for customers who stay in credit and therefore overdrafts charges tend to be higher cost than those specifically designed for those who dip in and out of their overdraft. Customers should also note if they do dip into their overdraft there may be a clause that they could be stripped of their credit interest," says Charlotte Nelson of

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Life and Style
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
Ruby Wax has previously written about her mental health problems in her book Sane New World
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas