Billions languish in accounts paying no interest

Here, we round up your options.

13:10 24 April 2013

When was the last time you checked how much interest you're earning on your current account balance? According to research by Santander, 30% of current account holders have no idea how much interest their account pays, while a third (33%) are not earning any interest at all.

You might think this doesn't matter. After all, a current account is usually just a place for your salary to go in and bills to come out. And yet a whopping £130billion is left over every month in the nation's current accounts just before payday, according to the bank. So why wouldn't you want to earn interest on that? 

 

If you never bother to move your surplus cash into a savings account, the good news is that current accounts are improving dramatically and a number of them now pay decent rates of interest on in-credit balances. In fact, some even pay better rates of interest than most savings accounts do.

 

So if you regularly stay in the black, why not switch to one of these current accounts and get some money back?

 

Here, we round up your options.

 

Nationwide FlexDirect Account

 

The Nationwide FlexDirect Account pays an incredible annual equivalent rate (AER) of 5.00%, but only on balances up to £2,500.

 

You'll struggle to find a savings account paying that much.
Be aware that you will need to pay in £1,000 a month to qualify for the 5.00% rate and after 12 months the rate falls to 1.00%.

 

However, if you open the account you will also have access to exclusive deals on savings accounts, mortgages, personal loans and credit cards, including the Select credit card which offers 0.5% cashback and fee-free spending overseas.

 

And, while you are unlikely to need it if you religiously stay in the black, there is also a 12-month fee-free overdraft in case you do dip into the red.
You can read more about the account here.

 

Nationwide FlexPlus Account

 

Another option from Nationwide is its FlexPlus Account which pays a lower 3.00% AER on balances up to £2,500, but you will also get worldwide travel insurance, mobile phone insurance, car breakdown cover, extended warranty cover, ID theft assistance, commission-free cash withdrawals abroad and access to exclusive product offers and rewards.

 

There is also a three-month fee-free overdraft and a £100 fee-free limit after that.
However, this is a packaged account so you will have to pay £10 a month for it. This is only worth paying if you know you'll make full use of the benefits included with the account. You can read more about it in Clare Walsh's article.

 

Santander 123 Account

 

If you tend to keep a larger balance in your account, the Santander 123 Current Account could be a better option as you can earn interest on balances up to £20,000.

 

You will earn 1.00% on balances between £1,000 and £1,999.99, 2.00% on balances between £2,000 and £2,999.99 and 3.00% on balances between £3,000 and £20,000.

 

On top of this you will earn cashback on some of your direct debits. You'll get 1.00% cashback on water, council tax bills and Santander mortgage payments, 2.00% cashback on gas and electricity bills and 3.00% cashback on mobile phone, home phone and broadband bills as well as paid-for TV packages.

 

Again, if you are always in credit, you're unlikely to dip into the red, but there is a four-month interest-free overdraft with the account. Be aware there is a £2 monthly fee on the account.
 
Lloyds TSB Vantage Account

 

The Lloyds TSB Vantage Current Account also allows you to earn interest on credit balances - this time up to £5,000. You will earn 1.50% on balances between £1 and £999.99, 2.00% on balances between £1,000 and £2,999.99 and 3.00% on balances between £3,000 and £5,000.

 

You will need to pay £1,000 into the account each month.

 

Halifax Reward Account

 

An alternative option is the Halifax Reward Current Account. Rather than paying you interest, it will reward you with £5 every month you pay in £1,000. So the maximum you can earn by the end of the year is £60.

 

However, you will currently also receive £50 cash if you switch to this account, bringing your total earnings to £110.

Note that a few changes are being made to this account on May 1 - you can find out more about this here.

 

First Direct 1st Account

 

Finally, if customer service is more important to you than anything else, you might want to consider the First Direct 1st Account. First Direct is renowned for its excellent customer service and while it doesn't pay interest on in-credit balances, you will receive £125 for switching to the account via MoneySupermarket, which you can read more about in my article. What's more, you'll be given a £250 fee-free overdraft in case you dip into the red.

 

Get switching

 

The switching process isn't as difficult as you might assume as your existing bank and the new one should do the hard work for you.

 

You'll be asked to fill in a few forms and your new bank will transfer any direct debits or standing orders over to the new account and arrange for your salary to be paid into your new account.

 

What's more, the process will become even easier in September. Rather than taking the current four to six weeks, you will be able to switch within seven days as Mark Hooson explains here.

 

But you don't need to wait for these changes to come into effect to switch - get switching today!

 

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.