Which? members snub interest with bank accountsJust 39% have a current account that pays interest

29 September 2014


We show you how to earn market-leading rates with multiple bank accounts 

Which? members are failing to make the most of interest-paying current accounts, according to a new survey.

We questioned over 13,000 Which? members about their current accounts and found that only 39% have an account that pays interest on balances in credit. Just 11% of those hold more than one interest-paying current account.

Current accounts limit the amount of money you can earn interest on and many require customers to deposit a certain amount of money each month in order to earn interest. 

However, it is possible to get around these restrictions by opening more than one interest-paying current account. 

With the best accounts paying up to 5% before tax, it's easy to see the attraction. Our new guide on making the most of multiple current accounts explains exactly how to do this. 

Here, we cover which accounts are best for short-term wins, long-term gains and day-to-day spending.   

Best accounts for.... 

Short-term win

Nationwide's FlexDirect pays the highest interest - 5% - on the first year, after which it drops to 1% on the highest in-credit balance up to £2,500. To qualify for interest, you must deposit £1,000 into the account each month from a non-Nationwide account. 

TSB's Classic Plus account also pays 5%, but only on in-credit balances up to £2,000. With this account you have to pay in £500 per month - though this can be an internal transfer - and you must also register for internet banking, paperless correspondence and paperless statements. 

Though not strictly a credit interest account, the Halifax Reward Current Account pays up to £160 in the first year. This is based on the £100 it pays you when you switch, plus an extra £5 each month you stay in credit, deposit in £750 and make two direct debits a month. In contrast to credit interest accounts, you don't need to have an ongoing account balance. 

Longer-term rate

TSB's Classic Account remains the best option paying the highest rate on the market - 5%. TSB allows customers to open two main and joint accounts, as long as you pay in £500 to each account each month. 

Lloyds Club Account offers the next best option, paying 4% as long as you have an account balance exceeding £4,000 up to a maximum account balance of £5,000. This account pays tiered rates of interest and at lower account balances is less competitive compared with the rates on offer from other savings accounts. 

To qualify, you must pay in £1,500 each month to avoid paying a £5 monthly fee. You must also set up two direct debits. 

Day-to-day current account use

If you have a fluctuating balance each month that brings your account balance close to zero, accounts that pay a fixed interest rate are the best option. In addition to the accounts from Nationwide and TSB, the Tesco Bank current account pays 3% on balances up to £3,000. You must deposit at least £750 into the account each month or pay a £5 fee.   

For customers with a monthly balance in excess of £3,000, Santander's 123 Account could be a good option if used alongside its cashback scheme. This pays between 1% and 3% cashback on selected household bills. The account has a £2 monthly fee and requires a monthly deposit of £500, while customers must set up two monthly direct debits from the account to qualify for credit interest. 

Find out more: Best bank accounts if you remain in credit - our tables make it easy to choose 

How to maximise your savings

Although credit interest bank accounts limit the account balance you can earn interest on, most accounts will allow you to either open more than one main account or a joint account, as long as you meet its monthly account requirements. 

For example, TSB will allow customers to open up to four main Classic Accounts (two main and two joint accounts) which increases the £2,000 limit up to £8,000. You must however make sure you meet the account requirements mentioned above. 

Although interest rates on cash Isas might not be as high as those offered with some current accounts, it's still worth maximising your tax-free allowance (£15,000) and where possible, transferring previous years' balances to a higher paying cash Isa.

Which? Comparison Table: Best instant-access Isas - all available deals compared

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