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Starling Bank to scrap interest on its current account – where can savers go instead?
Rates on instant-access savings accounts beat current accounts by a wide margin
Starling Bank is set to scrap interest on its current account from February, meaning customers building a nest egg may want to move their money elsewhere.
There are still a handful of providers that pay interest on current account balances, but you may find you can get a better rate with an easy-access savings account.
While interest is a big factor when deciding where to invest your cash, there are other important things to consider too.
To help you make the right move, Which? takes a look at how the two types of accounts compare.
What's happening to the Starling Bank current account?
Starling Bank's current account offers 3.25% AER on balances up to £5,000.
However, it has now decided to end that offer. From 10 February 2025, new and existing customers will no longer earn any interest at all.
Other perks offered by the current account, including fee free spending abroad and 24/7 customer service, will remain.
- Find out more: high-interest current account reviews
How do current account and instant-access rates compare?
Starling customers unhappy about the change to their account may want to consider switching.
Some banks and building societies pay interest on current account balances, but there are only a handful of options to choose from. For a better selection, think about putting your money in a savings account instead, where the returns are usually much higher.
Easy-access products work in much the same way as current accounts, allowing you to withdraw cash at any time without a penalty. And although rates are falling, it is still possible to grab a deal with a rate above 4.5% AER.
Starling's own restriction-free Easy Saver account, for example, pays an above-average 4% AER on balances up to £1m. You'll need to be an existing customer, so this is a hassle-free option for the bank's current account customers who don't want to change providers.
This table compares the best high-interest current accounts (including Starling Bank's current offering) with restriction-free instant-access deals.
| Current account | AER | Instant-access account | AER/EPR |
|---|---|---|---|
| Nationwide Building Society FlexDirect | 5% | Cahoot Sunny Day Saver (a) | 5% |
| Kroo Bank Current Account | 3.85% | Close Brothers Savings Easy Access Account | 4.7% |
| Starling Current Account | 3.25%* | Vanquis Bank Easy Access Account | 4.65% |
| Santander Edge Up | 3% | Gatehouse Bank Easy Access Account (s) | 4.6% |
| Lloyds Bank Club Lloyds | 3% | Cynergy Bank Online Easy Access Account | 4.55% |
Source: Moneyfacts. Correct as of 5 December 2024, but rates are subject to change. (a) 5% interest on balances up to £3,000 (s) This is a Sharia-compliant product, and so offers an expected profit rate (EPR) as opposed to an annual equivalent rate (AER). *No longer pays interest from 10 February.
As you can see, instant-access rates offered by four out of five providers in our table are higher than those offered by current accounts.
The gap between Starling Bank's current account and the top-paying easy-access savings account, Cahoot's Sunny Day Saver, is 1.75 percentage points.
Assuming you don't make any withdrawals and interest is calculated and compounded monthly, £3,000 in a savings account paying 5% AER would earn £150 in interest after 12 months, compared to £97.50 in a current account with a rate of 3.25%. That's £52.50 extra you could make simply by opening an easy-access account.
- Find out more: best savings accounts
How to find the right account for you
Interest rates are important, but they shouldn't be the only reason for choosing one type of account over the other. Here are five tips to help you make the right decision:
1. Always shop around
When deciding the best home for your savings, make sure you compare accounts from different banks.
Our guides to finding the best savings account and high-interest current account can help you make an informed decision on not only where to get the best rate but also what caveats may be hidden in the small print.
Our reviews also show how banks and building societies measure up for customer service and reveal those that have met our criteria to become a Which? Recommended Provider.
2. Watch out for withdrawal limits
One of the most common caveats to be aware of is limits on withdrawals.
Some top rate instant-access accounts will often limit how many withdrawals you can make each year without losing interest.
For example, Atom Bank's Instant Saver Reward account currently offers 4.85% AER. But if you make any withdrawals during a calendar month, the rate for that whole month – no matter what day you make the withdrawal on – drops to 3.25%.
3. Pay attention to how interest works
The first thing to note is that rates on both current accounts and instant-access savers are variable, which means they can go up or down at any time.
High-interest current accounts may also have a few rules over when and for how long interest is paid on balances. For example, interest is sometimes only paid for a period of 12 months. Others have tiered interest, where you get a higher rate for having a higher balance.
Another common quirk of current accounts is that banks will often only pay interest on balances up to a certain amount. For Nationwide's FlexDirect account, the limit is £1,500.
Also watch out for instant-access accounts that offer introductory 'bonus' interest rates that drop dramatically after 12 months.
4. You may need a big lump sum
Both current accounts and instant-access savings accounts will require a minimum amount of cash to open or maintain.
Some savings accounts can be opened with as little as £1 or nothing at all, but others such as the 4.7% AER instant-access deal from Close Brothers Savings ask customers to get started with a lump sum of £10,000.
High-interest current accounts often ask for a minimum monthly deposit. Both Santander's Edge Up and Lloyds Bank's Club Lloyds accounts require customers to pay in a minimum of £1,500 per month.
5. There may be fees involved
High-interest current accounts often ask customers to pay a monthly fee. For example, the Santander Edge Up account charges £5 a month.
You might also need to set up a few direct debits to open an account.
