Despite a number of providers offering attractive current account interest rates, this is not what they are intended for, the British Bankers' Association has said.
The BBA's remarks follow the publication of research by Moneyfacts.co.uk which shows current account in-credit rates have fallen significantly, with some providers deciding to scrap paying interest altogether.
More than half of current accounts on the market pay no credit interest, while 28% pay 0.10% or less, the figures show.
Michelle Slade, spokesperson for Moneyfacts.co.uk, commented: "The loss of interest at 0.10% is likely to make little difference to each individual customer, but for the banks it will be a significant cost saving.
"Most people bank with one of the big banks, so it is highly likely the majority of people are receiving no interest on the money in their current account."
But current accounts are for every-day banking, the BBA stressed in a statement this week; they are "not, and never have been, intended for people's savings."
While savings rates are so low, some current account providers are attempting to woo customers with attractive interest rates on their in-credit balances, some of which are higher than savings rates.
For example, the Santander current account is offering an interest rate of 5.00 per cent on in-credit balances, as well as £100 cashback for switching, and an interest-free overdraft for four months.
The Lloyds TSB current account is also offering a competitive rate of 4.00 per cent on balances between £5,000 and £7,000. Some of the best cash ISA rates are only topping around 3.00 per cent.
But the BBA is firm that current accounts should not be seen as a substitute for savings accounts, "although many accounts do attract a small amount of interest. They are exactly what they claim to be, an account from which everyday transactions – such as direct debits and ATM withdrawals – are managed."
The BBA also defends UK current accounts that are paying low interest rates, because they are not intended as high-paying accounts, and that unlike most other countries, UK banks still offer free banking, which customers do not have to pay for so long as they remain in credit.
"Banks offer a wide variety of savings products where interest is paid and people should shop around for the account which suits them best," it said.
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