How to boost your savings with high interest bank accounts

Bank accounts

How to boost your savings with high interest bank accounts

By Chiara Cavaglieri

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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 d 68%
Lloyds Bank Club account 2 c £1,500 - or £5 monthly fee 2 direct debits 4% on £4,000 - £5,000 e 59%
Tesco Bank current account f 2     3% on £1 - £3,000 65%
Santander 123 account g 2 c £500 2 direct debits 1.5% on entire balance up to £20,000 62%

Table notes (information correct at October 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.

aOne 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.

bTo qualify for credit interest each month. 

cOne must be a joint account.

dInterest rate drops to 3% from January 2017.

eInterest rate drops to 2% from January 2017.

fPays one Clubcard point for every £4 spent in a Tesco store, one Clubcard point for every £8 spent elsewhere.

g£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, although this will fall to £3 net (£3.75 gross) from 1st February 2017.

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: October 2016
  • Updated by: Chiara Cavaglieri