The best high-interest current accounts

As Tesco Bank cuts the interest rate on its current account to 1%, we reveal where you can earn a far better rate on your in-credit balances.

Tesco Bank has today slashed the interest rate on its popular current account from 3% to a measly 1%.

That's significantly lower than the leading current account rate of 5%, meaning customers should seriously consider their options if in-credit interest is important to them. 

Here, we run through the top options for those who are constantly in the black. 

Just be warned, the best high-interest current accounts are mostly ideal for small pots of cash.

For those who spend more of the month in the red, see our top accounts for cheap overdrafts.

Nationwide - 5%

Nationwide offers a market leading rate of 5% on its FlexDirect Current Account.

The rate is fixed on balances up to £2,500 for the first 12 months, after this time the rate falls to 1%, which is variable.

So, in your first year, you could pocket £125 from your savings.

Nationwide allows you to hold one account in a sole name and one in a joint name, so you could triple the amount earning 5% to £7,500 and potentially earn £375 from the pot.

To earn interest, you need to deposit at least £1,000 a month into the account, but you don’t need to have any Direct Debits set up, so it doesn’t necessarily have to be your main account.

Apply for a Nationwide FlexDirect current account

TSB - 3%

The TSB Classic Plus account pays 5% credit interest but only on balances of up to £1,500 until 2 July, which means you could earn up to £75 a year.

The interest rate will drop to 3% from 2 July, which means you end up earning up to £45 a year.

Unlike Nationwide the rate isn’t set to drop after 12 months. But this doesn’t mean the interest rate from TSB won’t change again as the rate on the account is variable.

TSB allows you to hold one account in a sole name and one joint account, so couples could potentially earn 3% on £4,500 spread across three accounts, which would generate £135 in interest in a year.

To earn 3% interest (or 5% until 2 July), you need to pay in a minimum of £500 a month, register for internet banking and opt for paperless statements and correspondence.

You don’t need to set up any Direct Debits on the account, so it doesn’t necessarily have to be your main account.

Lloyds Bank/Bank of Scotland - 1.5%

The Club Lloyds Current Account pays 1.5% variable on balances from £1 to £5,000. With this account, you could earn up to £75 in interest each year.

You need to set up two Direct Debits to earn interest and deposit at least £1,500 a month into the account each month or pay a £3 fee.

The account also offers the choice of one of three lifestyle benefits for every year you hold the account.

Lifestyle benefits include six free cinema tickets (Vue or Cineworld), an annual magazine subscription or an annual Gourmet Society membership.

The Bank of Scotland has similar criteria to the Club Lloyds Current Account, although you have to pay in less than the Lloyds account (at least £1,000).

You also won’t get charged a fee for having Vantage if you don’t pay in the minimum amount that month, stay in credit or have two different Direct Debits.

Find the right bank for you: compare current accounts

Santander - 1.5% 

The Santander 123 Current Account is best for those with larger balances.

You can get 1.5% interest on balances of up to £20,000, which means you could earn up to £300 in a year - a decent amount for an account that allows you easy access to your money.

To earn interest, you will need to pay in £500 a month into your account and have at least two active Direct Debits.

Santander allows you to open a 123 account in your own name and one in a joint account, so a couple could potentially earn 1.5% on savings totalling £60,000 spread over three accounts, which amounts to £900 a year.

The account attracts a £5 monthly fee, but you may be able to offset this with the cashback it pays on household bills.

You can get 1% cashback on water and Council Tax bills, as well as the first £1,000 you pay towards a Santander residential mortgage.

You can earn 2% cashback on gas and electricity bills, and certain Santander home insurance and life protection premiums, as well as 3% on mobile, home phone, broadband and paid-for TV packages.

Apply for a Santander 123 Current Account today

How to take advantage of high-interest accounts

High-interest accounts often have a few hoops to jump through to earn interest, like a minimum deposit each month or a minimum number of active Direct Debits.

A good way to take advantage of high-interest current accounts is to have more than one and move your salary around each month to meet the criteria to earn interest.

You could also set up small ongoing Direct Debits to meet other strict criteria.

A digital magazine subscription, for example, may help you meet this stipulation for as little as £1 a month, but you should ensure you use a Direct Debit, not a recurring payment.

Find the right bank for you: compare current accounts

This article has been updated

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