Current Accounts that pay Interest

Beat low savings rates with up to 5% interest in a current account!

Many people rely on instant access savings accounts for their emergency funds – as a safe place to keep easily-accessible cash for a rainy day. However, with this year’s crop of easy access savings accounts currently hovering around the 1.5% mark, the returns on this kind of savings option could look less than tempting. Therefore, it may come as a surprise to find that you could get 5% interest from a current account. Use the table below to compare current account that pay interest, or click on the links to find out more and apply online:

Interest Paying Current Accounts
 AccountInterest (AER)Overdraft RateFunding Required*Fee pmFeaturesApply
3% AER**£25 interest and fee free overdraft plus £10 buffer£500 per monthFree3% AER variable in-credit interest on balances up to £1,500More Info >
TSB Classic Plus Current Account

  • 3% AER on balances up to £1,500. Must pay in £500 a month, register for internet banking and paperless statements and paperless correspondence 
  • £5 cashback every month just for regularly spending with your debit card (minimum of 20 debit card payments) and £5 cashback every month just for paying two direct debits. Offer from 1st March 2017. Ends June 2018 (T&C's apply)
  • Plus if you also use an eligible TSB credit card you can earn up to £60 cashback in a year on that too. Representative 18.9% APR (variable). Subject to status. Must be 18+ and UK resident. Ends June 2018
  • £10 interest-free overdraft buffer
  • If you go overdrawn by more than £10, TSB's Grace Period means that you have until 10pm (UK Time) to pay in enough money to avoid any overdraft fees you may incur that day
  • 0% interest on planned overdraft up to £25
  • No monthly fee
  • Must be 18 or older and UK resident
  • 19.84% AER (variable) and a Monthly Overdraft Usage Fee of £6 apply to amounts of £25 and over
N/a*First £250 interest free, £6 pm thereafterNo minimum£19*Instead of interest you receive 2% rewards on 7 types of household bills if paid by Direct Debit, plus extra benefits including free Worldwide travel insurance, UK breakdown cover and mobile phone insurance.More Info >
NatWest Reward Platinum Current Account

  • Instead of interest you receive 2% off 7 types of household bills if paid by Direct Debit
  • On average NatWest customers earn £83 in Rewards per year. Based on monthly bills of £345 excluding the monthly £19 fee.
  • Includes many lifestyle benefits such as Worldwide multi trip travel insurance, UK car breakdown cover, mobile phone insurance & tastecard membership. Account terms & conditions apply
  • Access account anytime with 24-hour UK call centres, Online Banking and Mobile Banking app

  • Must be 18 or older
  • £19 monthly fee
  • £250 interest free Overdraft threshold. £6 per month thereafter

 

N/a*First £10 interest free, £6 pm thereafterNo minimum£12*Instead of interest you receive 2% rewards on 7 types of household bills if paid by Direct Debit, plus extra benefits including free European travel insurance and mobile phone insurance. More Info >
NatWest Reward Silver Current Account

  • Instead of interest you receive 2% off 7 types of household bills if paid by Direct Debit
  • On average NatWest customers earn £83 in Rewards per year. Based on monthly bills of £345 excluding the monthly £12 fee.
  • Includes many lifestyle benefits such as European multi trip travel insurance, preferential rates on travel money, mobile phone insurance & tastecard membership. Account terms & conditions apply
  • Ticket booking service, receive 25% cashback on tickets for theatre, dance, opera, concerts and more
  • Access account anytime with 24-hour UK call centres, Online Banking and Mobile Banking app

  • Must be 18 or older
  • £12 monthly fee
  • £10 interest free Overdraft threshold. £6 per month thereafter

 

N/a*First £10 interest free, £6 pm thereafterNo minimum£2*Instead of interest you receive 2% rewards on 7 types of household bills if paid by Direct DebitMore Info >
NatWest Reward Current Account

  • Instead of interest you receive 2% off 7 types of household bills if paid by Direct Debit
  • On average NatWest customers earn £83 in Rewards per year. Based on monthly bills of £345 excluding the monthly £2 fee.
  • Access account anytime with 24-hour UK call centres, Online Banking and Mobile Banking app

  • Must be 18 or older
  • £2 monthly fee
  • £10 interest free Overdraft threshold. £6 per month thereafter

 

 

Why choose a current account that pays interest?

While the traditional advice has been to move any spare cash into a savings account rather than letting it languish in a current account, in these times of record low interest rates it can actually make more sense to stash your emergency cash in a current account. Some accounts pay up to 5% interest – that’s more than double the interest rate you would receive from a traditional instant access savings account.

 

As an example, Nationwide's FlexDirect account offers 5% in-credit interest on balances up to £2,500 for the first year, which works out at 4.89% gross pa. Meanwhile, Santander’s 123 Current Account pays up to 3% interest on balances over £3,000. Both these rates are significantly better than current easy access savings rates and also beat several fixed rate accounts, with the added bonus of being able to access your money whenever you need to.

 

What are the conditions?

 

This method of saving may not be right for everyone, and there are several points you should take into account before opening a current account for this purpose:

 

  • You may need to have a set number of Direct Debits going out from the account each month in order to qualify for the interest rate deal.
  • You will need to make sure that you pay in any stipulated minimum amount each month. If you fail to do so you will not usually receive any interest for that month.
  • The money paid into the account will usually need to come from an external source – for example, from an account with a different bank, or in the form of a direct salary payment.
  • The preferential interest rate on offer may be fixed term – for example, you may only be eligible for in-credit interest for 12 months after account opening. Therefore you may wish to shop around for an alternative savings option when the deal comes to an end.

 

How to use a current account as a savings account

 

If you wanted to use one of these account as a savings account you could do so by transferring a set amount from your main bank account into the interest-paying current account at the beginning of each month. You can then transfer the majority of this money back to your main account, leaving the amount you want to save in the interest paying account.

 

For example, if you wanted to save £200 a month, you would transfer in the minimum amount required and then move £800 into your everyday current account. The remaining £200 will then sit in your interest-paying current account, earning you interest, for the rest of the month. Because you are not using the interest-paying current account as an everyday spending account, you won’t be tempted to spend money allocated as savings that could otherwise be earning you interest.

 

For people who are just starting to save, or who want a top-up emergency fund that’s easy to access and also pays a competitive rate of interest, current accounts that pay interest could provide an alternative to existing instant access savings accounts.