If you're fed up with the paltry returns offered by most savings accounts, it may be worth moving your cash into a high interest-paying current account.
Several current accounts pay returns more than three times higher than those offered by easy access savings and instant access ISAs, although the downside is that interest is usually only paid on balances up to a certain amount.High interest current accounts
Nationwide's FlexDirect account, for example, currently offers an annual equivalent rate (AER) of 5% on balances up to £2,500, while TSB's Classic Plus Account offers the same rate on balances up to £2,000. It's worth noting however, that the Nationwide account only pays 5% for the first year. After that, the AER falls to 1%. You must pay in at least £1,000 each month to qualify for this account.
Current account returns are now paid without any tax being deducted following the introduction of the new Personal Savings Allowance on April 6. The allowance means that most UK adults can earn up to £1,000 interest a year on their savings without having to pay any tax on their money. Higher rate tax payers will be able to earn £500 interest tax free. Additional rate taxpayers do not receive a personal tax allowance.
If you have a large savings pot, Santander's 123 account may be worth considering, as it pays 3% per cent AER on balances between £3,000 and £20,000. You'll also earn 1% cashback on any Santander mortgage payments (of up to £1,000 a month) that come out of your account, as well as on any water and council tax bills, and 2% on your energy bills. Mobile, home phone, broadband and paid-for TV packages will net you 3% cashback.
However, the Santander account has a £5 monthly fee, and you must pay in at least £500 a month and have at least two direct debits on the account to apply.
Kevin Mountford, head of banking at comparison website Moneysupermarket.com said: "Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount or cap the balance for which interest is paid, so it is important know what restrictions there are before you make the switch."
- Compare current accounts across the market
Several current accounts offer generous incentives to switch your account to them, so it's worth factoring these in too. For example, Mamp;S Bank will give you a £100 gift card when you switch to its current account. Although you won't earn any interest from this account it does give you access to the Mamp;S Monthly Saver account, which pays a 6% AER fixed rate for 12 months. You can also earn one point for every £1 spent on your Mamp;S debit card in Mamp;S in store and online.
Clydesdale Bank also regularly offers switching incentives to its current account, most recently offering £150. This deal ended on March 31 but keep an eye out for new offers. You'll earn 2% AER interest when you're in credit on balances up to £3,000 in this account.
If you tend to spend more time in the red than in the black, then you might want to consider First Direct's 1st Account. This account not only pays a s£100 witching bonus, but it also offers a £250 interest-free overdraft. Youll be charged an annual percentage rate (APR) of 15.9% on any borrowing over this amount.
If you tend to go overdrawn by more than this regularly, Nationwide's FlexDirect account is a good option as it offers a fee-free overdraft for 12 months. You'll need to pay off your overdraft during this period though, or when it finishes you'll be charged a daily usage fee of 50p on arranged overdrafts of £10 or more.
To get a full comparison of current accounts across the market, click here