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How to beat inflation with high-interest current accounts

You can achieve inflation-busting returns on up to £20,000

Now that inflation has jumped to a tear-jerkingly high 2.7%, savers have to be savvier to protect their money from being eroded.

At present, there are no savings accounts or cash Isas that can match inflation, but there is a lifeline in the form of current accounts.

High-interest current accounts offer rates of up to 5%, albeit only on small balances – and there are certain conditions you’ll need to meet in order to earn interest.

Still, our calculations suggest it’s possible to earn an inflation-busting return on balances of up to £20,000 by opening multiple high-interest accounts.

The high-interest current account game

The main catch with high-interest current accounts is the relatively small amounts of money they’ll pay interest on.

However, there’s little stopping you opening multiple accounts with several banks and spreading your savings across all of them in order to maximise your returns.

The graph below demonstrates the maximum rate you could earn on up to £20,000 worth of savings, and what accounts you’ll need to open to do so.

High-interest current accounts: the rules to follow

Our chart shows that in order to reach and inflation-busting return, you’ll need to make the most of what each of the accounts offer – and in some cases open up multiple accounts with the same provider.

You’ll need to invest the maximum in each account, as most have limits on how much you can invest.

Be aware that most current accounts will require you to set up a certain amount of direct debits in order to pay interest.

You’ll also need to credit your account with a minimum amount each month, but you can get around this by setting up standing orders to bounce your money across all of your accounts.

Our guide on the best bank accounts if you always stay in credit has more details about the specifics of each account featured in this example.

Alternative methods of beating inflation

Peer-to-peer lending companies offer superior returns to traditional lenders, although savers run the risk that the borrowers they are matched with could fail to repay.

Stocks and shares Isas often offer better long-term returns than cash accounts, but the value of the investments in your portfolio can go up and well as down.

If you’re not willing to risk losing your money, consider regular savings accounts. These accounts have to be credited every month, but offer rates of up to 5% AER.

However, the top-paying regular savers require you to also open a current account with the provider, and the amount you can credit your account with is capped.

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