We pick the top interest-paying current accounts, in our regularly updated round-up.
Savings rates are trickling in the right direction but they have a long way to go before they beat inflation, with top easy access rates of 1.3 per cent.
High interest current accounts however pay up to 5 per cent – a lucrative alternative for interest-starved savers.
We have scoured the small print to round-up the best interest-paying accounts.
Free money: We pick the best of the interest-paying current accounts
This page is kept up-to-date throughout the year – bookmark it for the very latest developments.
> Prefer a cash bonus instead? Skip to This is Money’s round-up of the best deals available
Nationwide – 5% interest on £2,500
Best interest rate
Nationwide’s FlexDirect account pays out 5 per cent in-credit interest on balances up to £2,500 for the first year – not bad considering most easy-access savings rates have slid in recent years.
Account holders are also eligible for a 0 per cent overdraft for the first 12 months, and reduced fees of 50p per day for arranged overdrafts after that.
You must pay in a minimum monthly income of £1,000.
It currently offers a recommend-a-friend scheme which pays £100 to you and £100 to friend and family you refer who go on to open a current account with the building society – up to a maximum of five.
Plus, if you’re accepted, you’ll be eligible for the Nationwide Select credit card. It gives 0.5 per cent cashback, cheap overseas spending and other perks.
If your income drops and you can’t pay in £1,000, you won’t receive any interest that month.
The 5 per cent interest deal ends after a year, when it drops to just 1 per cent. So it may be worth looking elsewhere after the 12 months for a better return on your money.
You get an interest-free arranged overdraft for that 12 months, but after that a flat rate charge of 50p per day applies, this will be costly for those who regularly go overdrawn compared to a typical interest-charging overdraft.
Unarranged overdrafts cost 50p per day for balances under £10 and £5 per day after that, capped at £60 per month.
If you like to carry out your banking face-to-face, this account might not be good for you because you can only access internet or telephone services as a FlexDirect customer.
This is Money verdict
Accounts that are good for both in-credit and overdrawn customers are few and far between. This account is a market-leading option for the first 12 months, but you may want to switch to another account once the introductory offers have gone.
Does your bank work for you? Lloyds Bank pays 2 per cent on your first £5,000
Bank of Scotland – 2% interest on £5,000
Bank of Scotland’s Vantage feature pays 2 per cent across a whole balance of £5,000. On July 1 this will drop to 1.5 per cent though.
The bank allows you to take out up to three accounts as long as you fulfill its qualifying criteria meaning its possible to earn interest across a total £15,000 balance.
It can be added to any of its Classic, Silver, Platinum, Gold or Premier Accounts for free.
Obviously, the bank only has branches in Scotland, but in England and Wales you can carry out most day-to-day banking tasks in a Halifax branch.
To qualify you must maintain monthly deposits of £1,000, stay in credit and pay in at least two direct debits.
Bank of Scotland has recently overhauled its fees and now charges a single fee of 1p for every £7 you borrow and there will be no paid and unpaid items fees.
Lloyds Bank – 2% on up to £5,000
Lloyds Bank currently pays 2 per cent across a £5,000 balance.
Savvy customers can use a clever trick to boost their earnings as the Club Lloyds account offers accountholders both a single and joint account.
Plus you can open the bank’s attached regular saver which earns 3 per cent on a maximum £400 per month.
Its attached lifestyle perk gives you the choice between a free annual magazine subscription, a Gourmet Society discount-dining card or six cinema tickets a year.
While not the most generous on the market, it does come with a £100 free overdraft buffer.
One drawback is that the bank charges a £3 monthly fee unless £1,500 is deposited into the account each month. On top of this you must set up two direct debits.
Lloyds Bank has recently overhauled its fees and now charges a single fee of 1p for every £7 you borrow and there will be no paid and unpaid items fees.
You can read more about the changes here.
Tesco Bank: The supermarket giant offers 3 per cent interest guaranteed for two years
Tesco Bank – 3% interest on up to £3,000
Tesco Bank pays 3 per cent interest on balances of up to £3,000 (worth £90 a year) and added opportunities for Tesco shoppers to earn Clubcard points.
It will guarantee the rate until April 2019. This goes against the grain at a time when most banks are hacking at account interest and perks.
Tesco debit cards double up as Clubcards, earning both standard loyalty points and an extra boosted rate.
You get 1 point per £1 spent in stores on top of the standard loyalty scheme, meaning a total earning 2 points per £1 spent in stores.
A £1,000 per month including £250 spent in Tesco could be worth up to £70 off your shopping.
Plus it will also reward shoppers with extra Clubcard points when using their debit card in stores (see below).
The does require new customers to jump through some added hoops. You must now pay in at least £750 a month and maintain three direct debits.
But customers can still open both a personal and joint account – for a couple this means 3 per cent interest on up to £9,000.
Agreed and unagreed borrowing incurs interest of 18.9 per cent AER.
It offers a fairly simple overdraft deal, but for unauthorised borrowing you may incur extra charges for any payments that are rejected or paid beyond your limit. These costs £5 each and are capped at 10 per statement period.
Tesco Bank charges £5 for each payment made or rejected when accountholders are in an unauthorised overdraft.
It does have a handy feature that sends a text message or email to notify them if they have strayed beyond their limit, meaning if customers repay the amount by 5pm they won’t be charged.
Santander 123: Account holders will see their earnings halved from November 1 2016
Santander 123 – 1.5% up to £20,000
The Santander 123 Account pays customers up to 1.5 per cent interest on balances up to £20,000 for a £5 monthly fee.
It’s not nearly as generous as it once was but it’s still worth it if you have a big balance and considering the added cashback feature on top of the incredit interest.
What you get
The account still offers double benefits. On top of the flat rate 1.5 per cent interest, Santander also offers monthly cashback on key services such as mortgage payments, council tax bills, electricity, gas, mobile and home phone, broadband and TV packages paid direct into your account.
Check first that your supplier is eligible – not all are included in the scheme, particularly smaller energy firms. All bills must also be paid by direct debit.
You get 1 per cent on your Santander mortgage (up to maximum monthly mortgage payments of £1,000), and on any spend on water and council tax bills that come out of the account.
Electricity and gas bills generate 2 per cent, with 3 per cent from spending on mobile, home phone, broadband and paid-for TV packages.
Household bills exclude your TV licence, maintenance/insurance contracts, commercial use or commercial mortgages.
There is a monthly fee of £5 and to be eligible for cashback services you must set up a minimum of two direct debits and pay in at least £500 every month. But to get the most benefit from this account, it’s best to retain a credit balance of at least £1,000.
Arranged overdrafts are charged at £1 a day. Unarranged overdrafts shoot up to £6 a day with no cap on unauthorised borrowing.
TSB – 5% on up to £1,500
TSB offers 5 per cent interest on your balance up to £1,500.
But unsurprisingly it doesn’t feature higher up This is Money’s list thanks to its recent history in handling customer accounts.
It only requires a £500 monthly deposit. New customers are limited to one single and one joint account.
You must maintain two direct debits, register for internet banking, paperless statements and paperless correspondence.
There are some hefty penalties for going overdrawn beyond its free £35 buffer: Authorised and unauthorised overdrafts are subject to a monthly £6 fee while interest is charged at 19.94 per cent.
Unplanned borrowing comes with additional daily fees on top of the £6 monthly fee. It costs £5-a-day for amounts above the £10 buffer but below £25, anything above £25 incurs a £10-a-day charge.
THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS