As Santander once again slashes the rate for 123 Current Account customers, we look at the best alternatives for earning interest on your in-credit balances.
Santander has announced it will halve the rate of interest on its 123 Current Account to just 0.3% in the latest blow to savers.
That's significantly lower than the leading current account rate of 2.02% (albeit on far smaller balances), meaning customers should seriously consider their options if in-credit interest is important to them.
In this article, we'll look at the changes being made to the 123 account and then 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.
Santander - 0.3% from April (currently 0.6%)
If ever one product summed up the plight of UK savers, it's the Santander 123 Current Account.
In the space of four and a half years, accountholders have seen their rate on in-credit balances slashed to just a tenth of the original 3% value (from April), the monthly fee has doubled – and even the cashback perks have been reduced.
It was once the gold standard for savvy customers looking to earn a decent rate and pocket some cashback and, while the account can still offer good value for some households, it's most certainly not right for everyone so you should definitely consider your options if you're an existing customer.
So, what's changing?
From 12 April, the rate you earn on balances of up to £20,000 is being halved from 0.6% to 0.3%, meaning you will earn a maximum of £60 in interest a year (a reminder, that figure was £600 back in 2016) rather than £120.
As a small concession, Santander has said it will reduce the monthly fee slightly from £5 to £4, so that's a £12 annual saving.
The cashback perks, which we've listed below, will be unchanged.
To earn interest, you will still need to pay in £500 a month into your account and have at least two active Direct Debits.
Thankfully, there are a few banks that will pay you a far more generous rate on in-credit balances, which we'll run through next.
But, as we mentioned at the start, they are mostly suitable for savers with really small pots of cash.
Virgin Money - 2.02%
The Virgin Money current account offers a market-leading rate of 2.02% AER.
While this is limited to the first £1,000 in the account, it does come with a linked access savings account with a rate of 0.5% meaning your larger pot of savings could earn more than the Santander account mentioned above while still allowing you to withdraw your cash easily.
Helpfully, there's no minimum amount you have to pay in each month to qualify for the account, and you can also bag a free 15-bottle case of wine from Virgin Wines when you apply.
Nationwide - 2%
Nationwide offers a decent rate of 2% on its FlexDirect Current Account.
The rate is fixed on balances up to £1,500 for the first 12 months, after this time the rate falls to 0.25%, which is variable.
So, in your first year, you could pocket £30 from your savings.
Nationwide allows you to hold one account in a sole name and one in a joint name, so a couple could triple the amount earning 2% to £4,500.
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.
Lloyds/ Bank of Scotland - up to 1.5%
With the Club Lloyds and Bank of Scotland Vantage accounts, you can earn up to 1.50% AER on larger savings pots than the two current accounts mentioned above.
Both accounts feature a tiered rate, paying 0.60% on balances between £1 and £3,999, and 1.50% AER (1.49% gross p.a.) variable on balances between £4,000 and £5,000.
To qualify, you need to pay at least £1,000 each month, keep your balance above £0 and set up at least two different Direct Debits.
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