The top current accounts for interest

Article updated 10 June 2014

Most savings and current accounts have been paying dismal rates of interest for at least five years now. So we were delighted when Nationwide grabbed the headlines in March by upping the rate on its FlexDirect current account to a heady 5%. Up until then, the rate had been just 2%.

At the time, the retail price index (a measure of inflation) was running at 2.5% for March. So, with a 2% interest rate, FlexDirect account holders had actually been losing money in real terms

But then more good news followed. TSB, perhaps hoping to ingratiate itself with customers following its public split with Lloyds, trumpeted the arrival of its Current Plus account, also offering 5% interest. Ed Bowsher covered this in detail.

Not only could savers now comfortably beat inflation, but they could choose with whom they did it. Better still, TSB customers only have to deposit £500 a month to win their coveted 5%, compared to the £1,000 a month Nationwide demands.

If you’re not keen on the TSB account, Lloyds has its Club Lloyds account which pays 4% if you have a balance of between £4,000 and £5,000.

After these three front-runners, interest rates fall to 3%.

Tesco Bank has launched a current account that pays 3% on balances up to £3,000, and lets you collect Clubcard points on your debit-card spending, at Tesco and elsewhere. It’s free if you pay in over £750 a month, otherwise you’ll have to pay £5 a month.

For £2 a month, you can earn 3% a year with the Santander 123 account, or you can get the same rate with Bank of Scotland as long as you have a balance of at least £3,000.

Of course, there’s more than just interest rates to consider when choosing where to park your cash. Overdrafts, benefits and signing-up rewards are all important too. But to keep things simple, we’ve made interest rates our focus. We’ve also excluded children’s accounts that tend to offer more generous rates of interest.

One thing you will want to look out for is whether that headline interest rate is for a limited time only. In true Cinderella style, Nationwide’s shining 5% morphs into an ugly 1% after the first 12 months. So, you may want to think about switching accounts after the first year.

In the table below, we list the top six current accounts currently on offer ranked by their interest rates. We haven’t included Halifax here, because its Reward Account doesn’t offer interest as such. But it does pay you £5 for every month you pay in £750.

Name Interest rate Minimum amount to be paid in monthly
TSB Classic Plus 5% up to £2,000 £500
Nationwide FlexDirect 5% up to £2,500 – 1st 12 months £1,000
Club Lloyds Tiered: 1% to 4% up to £5,000 £1,500
Tesco Bank Current Account 3% up to £3,000 £750. Otherwise £5 monthly fee
Santander 123 Current Account Tiered: 1% to 3% up to £20,000 £500. Also pay £2 monthly fee
Bank of Scotland Classic with Vantage Tiered: 1.5% – 3% up to £5,000 £1,000
Clydesdale / Yorkshire Bank Current Account Direct 2% up to £3,000 £1,000


So, that’s a quick round-up of the best current accounts for earning interest. We plan to update this article regularly.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12