High interest current accounts are making an appearance on the high street, but what exactly are they offering and are they the right option for you? A high interest current account is relitively self-explanatory. These are current accounts that pay a high rate of interest on balances. However, they are not all the same, and there are a number of requirements for eligibility. That is, you must fit certain criteria to open a high interest current account and certain restrictions apply.
So, what are the conditions? The most common condition is the requirement to deposit a minimum amount each month. This can vary from £500 to £1000. For self-employed people, who do not receive a regular monthly pay cheque, this could be a problem but is ideal for those who are employed and deposit their monthly pay cheque into the bank anyway. Some of these accounts may also require you to start off with quite a high opening balance.
Other high interest current accounts require you to set up a minimum of four Direct Debits per month. This might not be a problem for you (if you already have Direct Debits set up, for example), but could put some people off.
It is also worth noting that some of these accounts come with fees. Although the interest should offset any fees you are paying, it is very worthwhile to check this out before you sign on the dotted line.
Savings accounts are typically paying very low interest at the moment, so it makes sense to check out these high interest current accounts if you can. There is no point having money languishing in a low interest savings account when it could be working harder for you elsewhere.
We have looked at three of the most attractive high Interest current accounts for you. They have the added advantage of being able to be opened online.
- Nationwide Flex Direct – this account has the highest interest of any on the high street, currently at 5%. It requires a minimum monthly deposit of £1000 and does not require you to set up Direct Debits. It has the added bonus of being fee free too. But beware, this great rate is only for the first twelve months, after that it drops to just 1%.
- TSB Classic Plus – This account requires a monthly deposit of £500 and will pay interest of 5% on balances up to £1,500. You must also register for internet banking
- Tesco Bank Current Account – currently paying 3% on balances up to £3,000. This account requires you to set up at least three Direct Debits and pay in a minimum of £750 per month.
In summary, these high interest current accounts could work really well for some people. They are designed for smaller amounts of money than traditional savings accounts, but do have some very attractive features. If you have a regular pay cheque and can meet the criteria, they are well worth looking into.
It is also worth noting that you may be able to earn extra cash by switching. Some people are working these accounts to their advantage by leaving a lump sum in the account, paying in the minimum amount each month and then withdrawing it back to their regular current account. It might be too much work for most of us, but could be interesting if you are on a maximum saving spree - to get a house deposit together, for example.