This week's best current accounts
Interest rates on savings accounts are so low that more people are turning to their current accounts to grow their cash.
If you keep your balance in credit they can deliver healthy returns, but can prove expensive if you dip into the red, so if you frequently have a low balance it’s better to opt for an account that offers cheaper agreed overdraft borrowing.
Many others offer attractive up-front offers to tempt you into switching.
There’s normally a couple hoops to jump through, but if it’s very easy to do through the Current Account Switching Service, and returns can be lucrative.
Millions of people have switched their current account since the service was launched in 2013. Each week Moneywise will be bringing you the best of what the current account market has to offer.
Best high interest current accounts
5% interest on balances up to £2,500
The 5% interest rate is an introductory 12 month offer - when it ends the rate drops to just 1%. Agreed overdrafts are free for the first year but you’ll need to pay in at least £1,000 a month.
Bank of Scotland Vantage
3% interest on balances between £3,000 and £5,000
Holders must pay £1,000 into the account each month, stay in credit and pay out at least two direct debits. To access this interest rate you must open a standard current account with the bank and request its Vantage add-on. The interest rate on this account will be cut to 2% on all balances up to £5,000 from 11 June 2017.
3% interest on balances up to £3,000
The supermarket giant pays 3% interest on balances up to £3,000 and has guaranteed to maintain this rate of interest until 1 April 2019. 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. For new customers this account also has a £750 minimum pay-in and requires three direct debits to be set up.
TSB Classic Plus
3% interest on balances up to £1,500
You’ll need to pay in at least £500 a month, register for internet banking, opt-in for online bank statements and paperless correspondence to get this headline rate. New customers also earn £5 cashback every month for having two direct debits plus another £5 cashback if you spend with your debit card 20 times a month. This cashback offer ends 30 June 2018.
Santander 123 Current Account
1.5% interest on balances up to £20,000
This account comes with a £5 monthly fee, but also very generous cashback on household and utility bills. This requires £500 monthly minimum pay-in and two active direct debits.
Best current account switching bonus
Co-operative Bank Current Account
£110 to switch
The Co-op offers a £110 bonus when you move using the switching service and. This account also offers up to £5.50 a month in cashback but you must have four active direct debits and pay in £800 each month.
First Direct 1st Account
£100 to switch, £100 if you leave within six months
First Direct will pay you £100 cash if you switch to one of its current accounts. It will also pay you another £100 if you are unhappy with the service and leave after the first six months. To qualify, you’ll need to transfer via the Current Account Switching service and deposit at least £1,000 in the first three months.
M&S Bank Current Account
£125 M&S gift voucher to switch, plus £5 a month for a year
M&S Bank give a £125 voucher to new current account switchers, plus a £5 voucher each month for a year, providing you pay in at least £1,000 a month. The deal is also available on M&S’s £10 a month Premium Account.
Halifax Reward Current Account
£75 to switch
Halifax will pay anyone who switches to its current account a £75 bonus, plus a £3 reward each month you pay in £750 or more, pay out at least 2 different direct debits and stay in credit. The same reward is also available on its Ultimate Reward Account. That charges a £10 monthly fee, or £15 if you pay in less than £750 per month.
Best authorised overdrafts
First Direct 1st Account
£250 interest free overdraft
A healthy interest-free overdraft but anything above this is charged at 15.9% rate.
M&S Bank Current Account
£100 interest free overdraft
This account has an £100 interest-free overdraft. Go further into the red and you’ll be charged at 15.9%.
Best for customer service
Picking the right bank isn’t just about getting the highest interest rate, or lowest overdraft fees. Service is equally important. That’s why the Moneywise Customer Service Awards look at the companies readers trust the most each year.
The 2016 Awards, which consider the views of 24,000 readers, show that Metro Bank is the most trusted current account provider in the UK. Readers scored it 4.9/5 for trust, narrowly beating First Direct, which has also consistently scored well over the years.
Nationwide, TSB and Santander complete the top five in that order, with customers swayed by high interest deals.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.