Ditch these current accounts - quick!

by Rachel Wait on 10 August 2011  |  43 comments
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Half the current accounts on the market pay absolutely no interest. If your current account is one of them, it's time to switch...

You’d have to have had your head under a rock for the past couple of years not to know that savers are getting a pretty raw deal right now. Following a significant cut in the Base Rate, banks have been quick off the mark to lower the interest rates on their savings accounts.

However, it’s not just savings accounts that have taken a severe bashing. Current accounts are also being impacted by low interest rates. In fact, according to Moneyfacts, a whopping 48% of current accounts offer absolutely no credit interest at all. That’s right, none, zilch, a big fat zero!

The worst current accounts

According to Moneyfacts, there are 123 current accounts on the market that are currently NOT paying any interest. So before you rush off to find out whether your current account is one of those, the table below highlights 20 of them:

Although I haven’t mentioned all 123 accounts, it’s worth noting that several of the lenders mentioned above - namely Halifax, HSBC, The Co-operative, Barclays, Clydesdale and Yorkshire Bank - have several different current accounts, most of which pay no interest.

So if you do have a current account with one of these lenders, there’s a good chance you’re not receiving any interest.

Of course, you could argue that a current account doesn’t exist to earn you interest. After all, that’s what a savings account is for, so does any of this really matter? However, I would argue that yes, it does. There are still current accounts on the market that DO pay interest. So why put up with one that doesn’t?

What’s more, the interest rates on certain current accounts are BETTER than you’d get on most savings accounts! So if you do have a current account that’s not giving you anything extra, it’s time to switch to one that does. Below, I’ll reveal three of the top current accounts in town.

Super Santander

A good place to start is the Santander Preferred In-Credit Rate Account. This account offers a fabulous interest rate of 5% on balances up to £2,500. What’s more, if you switch to this account, you’ll be given £100 in cash. I mean, what more could you ask for?

Of course, as you’d expect, there are a few catches. Firstly, to qualify for the 5% you will need to pay £1,000 into the account each month. Fail to do so and you’ll be back to earning nothing. You will also need to transfer over all your direct debits from your existing current account – however, Santander will do the hard work for you with its switching service.

And lastly, the 5% interest rate is only valid for one year – after which point, the rate drops to 1% (although this is still more than a lot of current accounts are paying!).

Personally, however, I think a cash reward of £100 and earning 5% for a year offsets any of these drawbacks.

Luscious Lloyds TSB

Another option to consider is the Lloyds TSB Classic Account Vantage which pays an impressive 3% interest. The drawback to this account is that you will only receive the 3% on balances between £3,000 and £5,000 – so you will need to keep a fairly decent sum of money in your current account. On the plus side, this is a permanent rate of interest, so it’s not going to disappear after a year.

Bear in mind that you will need to pay £1,000 into your account each month.

Heavenly Halifax

Finally, the Halifax Reward Current Account will give you £5 every month you pay in £1,000, whether you’re in credit or overdrawn.

What’s more, if you open this account, you’ll also be able to get an extra 0.20% in interest on the Halifax Web Saver Extra which offers a competitive interest rate of 2.50% - allowing you to earn as much as 2.70%. (Bear in mind you can only make one penalty-free withdrawal per year with this savings account.)

You can find out more about all three of these accounts using our current account comparison service.

So if your current account isn’t rewarding you, make sure you get switching today!

This is a classic article which has been updated.

More: Five things you’re wasting your money on | The banks you can’t trust

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