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Compare high interest accounts

Some current accounts offer a higher rate of interest than standard accounts, depending on your balance or the amount you pay in every month. We compare high interest bank accounts from 5 banks.

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What is a high interest account?

A high interest account is either a current account or an account linked to your current account.

You might be able to get one from your current bank or building society. Or you could switch to a bank that does offer one.

Your current account is your main bank account. It’s usually the account that your employer pays your salary into.

Many high interest accounts require you to make a minimum monthly deposit and set up 1 or 2 direct debits. Otherwise, the bank may not apply the high interest rate to your money.

Is a high interest account the same as a current account?

A high interest current account is similar to a standard current account. Both have features that apply to daily spending. For example, they:

  • Allow easy and regular access to your money without paying a fee
  • Require a minimum monthly deposit amount
  • Come with a debit card.

But a high interest account may not be the equivalent of a current account. Sometimes, it’s linked to your current account instead. You would not be able to get the high interest account on its own without the associated current account.

This means you could have to transfer money from your current account into the high interest account. You could do this with a standing order or direct debit.

High interest accounts often have an upper limit as to how much you can earn interest on.

For example, the bank offers 5% interest on up to £2,500. This means you could have £10,000 in the account, but only earn interest on the first £2,500.

A high interest bank account is different from a savings account. A savings account is generally where you deposit money and leave it to accumulate interest. Savings accounts do not come with debit cards.

How do bank interest rates work?

Interest rates are generally related to the Bank of England base rate. The higher the base rate, the higher interest rates on savings, but also on debt products like mortgages.

Banks use the Bank of England base rate as a guide as to how much interest they charge or reward you with. They do not just have one set rate but have different rates for different products.

If you have money in your current account, your bank may pay you interest on the credit balance.

The bank uses your money to lend to other customers, such as mortgage borrowers. They then earn on this money through the interest they charge on the loan. Your bank then passes on some of the interest it has earned to you.

The interest rate is known as the AER or Annual Equivalent Rate. This is the rate you will be paid by your bank on your deposits.

Getting the high interest rate on offer, may depend on:

  • The current deals they have
  • How much you have in your account
  • The amount you pay in every month.

When you’re looking for the best high interest current account, make sure you’ll meet the bank’s criteria to secure the high interest rate.

What does high interest mean?

What constitutes as high interest depends on the state of the market at the time.

These days, 5% is considered high.

Following the financial crash in 2008, interest rates fell to record lows. This was good news for borrowers, because they would have to pay less interest on debt. But it was bad for savers who could barely earn any interest on top of their cash.

When it comes to savings, high interest is the thing to look out for.

If you shop around using our comparison tool, you could find a high interest current account of as much as 5%.

You can find out more about how current account interest rates work here.

What are the best current account interest rates?

The best high interest current account interest rates on the market are around 5%.

Rates range from 1 to 5 per cent. Anything under 1% is considered bad.

High interest rates do not last forever. Many accounts drop their rates after 12 months.

Before your rates drop, compare new accounts with the best rates and move your money over.

How do I find out which banks pay the highest interest rate?

To compare the best deals from different banks and building societies, use our comparison tool.

When you have the results, look carefully at what the different accounts offer.

Ask yourself:

  • Do they provide a free overdraft?
  • Is there a minimum amount you need to pay in to open it?
  • Is there a minimum monthly deposit amount?
  • Do you need to set up any direct debits?
  • How long does the high interest offer last?
  • Does this account need to be your main current account?
  • What’s the maximum amount the bank will pay interest on?

These are just some of the restrictions banks place on their high interest accounts.

For example, to receive 5% interest on your savings, you may have to:

  • Arrange an overdraft
  • Pay in £10 to open the account
  • Pay in a minimum £1,000 into your account each month
  • Set up 2 direct debits from the account
  • Use the account as your main current account
  • Deposit a maximum £2,500 over the course of the deal.

How do I find the best high interest account?

Some of the best rates these days are between 3 and 5 per cent.

At the time of writing (February 2020)

The FlexDirect Account from Nationwide Building Society pays 5 per cent interest on balances up to £2,500 for 12 months

The Classic Plus Account from TSB pays 3 per cent interest on balances up to £1,500

To get the best account that’s right for you, you may need to shop around. Comparison tools like ours are a great way to do this.

Making the most from your high interest bank account.

If you have a large amount of money in your current account then a high interest bank account could be good for you.

Check what the maximum balance is for interest payments.

For example, the maximum amount you can earn interest on is £2,500. But if you have more than that and do not need access to it for day to day spending, it might be worth putting that extra money into a savings account or an ISA.

Always read the terms and conditions and check what interest rate you’ll get once the bonus term ends. If it’s very low, you may need to get a new account with better interest.

What are the things I need to check with a high interest bank account?

Check the interest rate is not too good to be true!

An interest rate of more than 5 per cent is unusual. If you see an account with more than 5% interest, read the full terms and conditions carefully before you deposit your money. There may be a high fee, minimal withdrawal allowances or a short offer period.

Check the firm is authorised with the government’s Financial Services Compensation Scheme (FSCS).

This scheme protects funds of up to £85,000 per financial institution in the unlikely event of your bank going bust.

The pros of high interest accounts

  1. Interest rates are often higher than savings accounts or ISAs
  2. You have the added convenience of a current account, so have easy access to your money
  3. They’re competitive, meaning you have a lot of choice
  4. You may not have to pay tax on the interest you earn on your savings thanks to the personal savings allowance (PSA)
  5. You do not need to have a good credit score to apply.

How can I find out more information about current accounts?

Discover more about bank accounts and how to choose the right one for you in our comprehensive guide about current accounts.

What does 'most popular' mean?

Bank accounts on this table are ranked by popularity, which we have judged according to how many clicks they got over the past 48 hours.

Those with the most clicks are at the top of the table, and those with the least at the bottom.

However, the most popular account might not be the account for you. You should still take time to filter and search all the accounts listed to see if there’s one that better fits your needs.

Which banks does Uswitch's comparison include?

We compare current accounts from a wide range of high street banks and newer challenger banks. Compare our current account providers to check which ones we include.