How to boost your savings with high-interest bank accounts
Maximise your cash savings by transferring funds between multiple high-interest bank accounts.
Given the poor rates of interest offered on savings accounts, many savers are turning to high-interest current accounts.
The drawback with this type of account is that they usually limit the amount on which you can earn interest and come with other restrictions such as minimum monthly payments.
This guide shows you how to work within these rules to beat the limits and make the most of your cash by opening multiple high-interest bank accounts. Savvy savers have discovered that excellent rates of interest can be achieved by moving their money between accounts at the right time.
Find out more: Best current accounts if you always stay in credit – we round up your options
Moving your money: how it works
These are the steps you need to take. Our example applies to a saver with £4,500 available to leave as deposits in high-interest current accounts and a further £1,000 available to circulate between accounts.
Step 1: Find the best rates
Check the interest rates and cash limits for the accounts you may use. Our table below shows you the best rates available on current accounts. The number of accounts you can open is limited only by the amount of money you have to save and the bank's rules.
Step 2: Check the account requirements
Banks often require you to meet specific monthly account requirements – such as fees, minimum monthly deposits and direct debits – to qualify for interest or to avoid paying a monthly fee on the account.
Make sure you can comply with the account requirements. Lloyds Bank Club and Santander 123 account holders, for example, must set up two direct debits in order to qualify for the best interest rates.
Each account limits the balance on which you can earn interest but, in most cases banks, will allow you to open a second main or joint account, essentially doubling that amount.
Watch out for accounts with tiered interest (where you get a higher rate for having a higher balance) as you must have a balance within the top tier to earn the top rate of interest. At lower tiers, these accounts become less competitive.Our table will help you keep track of these details.
|High interest bank accounts|
|Provider||Number of accounts that can be opened||Minimum monthly deposit||Direct debits||Maximum rate of interest, payable||Customer score|
|Nationwide FlexDirect||2 a||£1,000 b||5% on £1 - £2,500 for 12 months, 1% after||69%|
|TSB Plus account||2 c||£500 b||5% on £2,000||68%|
|Lloyds Bank Club account||2 c||£1,500 - or £5 monthly fee||2 direct debits||4% on £4,000 - £5,000||59%|
|Tesco Bank current accountd||2||3% on £1 - £3,000||65%|
|Santander 123 accounte||2 c||£500||2 direct debits||3% on £3,000 up to £20,000||62%|
Table notes (information correct at June 2016)
Current account customer scores based on a survey of 5,939 responses from the general public, taken in January 2016. 'n/a means we don't have enough responses to calculate a score.
a One main and joint account. Any extra accounts only get standard 1% interest. If you've had a FlexDirect account in the previous year you won't get the 5% rate.
b To qualify for credit interest each month.
c One must be a joint account.
d Pays one Clubcard point for every £4 spent in a Tesco store, one Clubcard point for every £8 spent elsewhere.
e £5 monthly fee. Account also pays between 1% and 3% cashback, see provider website for more details.
Step 3: Earn instant cash for switching
Start by making a Halifax Reward current account your main account. Although this isn’t a credit interest account, we recommend you begin with this switch to take advantage of the account’s £100 tax-free switching incentive. The account also pays a £5-per-month reward as long as you pay in at least £750 a month. For our example, you will need to start with £1,000 in this account that will be used to circulate around your high-interest current accounts and return to the Halifax each month.
Step 4: Open multiple bank accounts
Let's imagine you have a further £4,500 to play with. You could put £2,500 in a Nationwide FlexDirect account and another £2,000 in a TSB Plus Account. If you have more available to save, look further down our table for the next best high-interest accounts.
Step 5: Transfer cash from your main account
Now transfer the £1,000 from your Halifax Reward account into your Nationwide FlexDirect account. The FlexDirect account offers an interest rate of 5% on deposits up to £2,500 but you must make a minimum £1,000 deposit each month. Your transfer-in of £1,000 ensures you will comply with this condition and achieve 5% on your £2,500 deposit. At this point, your Nationwide FlexDirect balance will stand at £3,500.
Step 6: Circulate it between your other accounts
Next, transfer £1,000 from your Nationwide FlexDirect account to your TSB Plus account. This account offers 5% interest on deposits up to £2,000. The minimum monthly deposit on TSB's Plus account is £500 a month, so your transfer has met this requirement, meaning you have just earned 5% on a further £2,000 of your savings. The balance on your TSB account will now stand at £3,000.
Step 7: Transfer it back to your main account
Finally transfer £1,000 from your TSB Plus account back into your main Halifax Reward account, along with any interest you have earned. You have just earned 5% interest on a total savings pot of £4,500.
Step 8: Repeat steps 5 to 7 each month
Repeat steps 5 to 7 each month, ensuring you meet the requirements of all the accounts and earn the most interest possible on the whole £5,500.
It’s worth remembering that although this approach can be effective, you should consider using up your tax-free Isa allowance first.
- Last updated: July 2016
- Updated by: Chiara Cavaglieri
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