The high interest current accounts competing with savings accounts’ rates

I’m a savings expert that has a confession.

For months I’ve been sharing the latest data that illustrates how rates on savings accounts have increased since this time last year. Consequently, I’ve urged you all to consider moving your money if it’s sitting in a low-interest account. 

This is because I’ll always champion getting as much money as possible for your hard-earned savings. But, that doesn’t mean we should ignore current accounts, as rates are changing there too.

As a savings expert - it doesn’t mean I’m only going to talk about savings accounts - instead let’s delve into the world of current accounts to see whether you could be getting a better deal there too. 

Reviewing the market

The first thing to consider when reviewing the current account market is that there are still many offering 0% interest. Using data from Defaqto* at the time of writing, we sourced the average interest rate on current accounts this month and found 81 current accounts still have 0% interest but 20 current accounts have an average interest rate of 1.58%. 

If you compare this to July 2022, you’ll find 71 current accounts had 0% interest and 13 current accounts had an average interest of 1.49%. 

That means millions of people have money sitting in the bank that’s earning them no interest at all.

This is especially frustrating as the average interest rate on an easy access savings account today is 2.74% and the average interest rate on a one-year fixed-rate bond, which is 4.91%. So moving your money out of a low (or even no) interest current account and into a savings account is a good option. 

It just might not be the best one.

It’s not the best option because, right now, the best easy access account is actually a current account.

The top current account for interest

The maximum interest rate on a current account for July 2023 is a whopping 5% - thanks to Nationwide’s FlexDirect account. In comparison, the top interest rate for an easy access account is 4.35% from Yorkshire Building Society. 

This should then pique your interest, as if you don’t have a large sum of money waiting to gain interest, a current account with a high interest rate can get you more money than a savings one automatically. 

If you do have a lump sum of money and you don’t need to touch it for at least a year, fixed-rate savings accounts are still reigning supreme as the highest rate currently available is 6.1% from FirstSave. 

But if you need easy access to your money before then, there’s no place it will earn more than Nationwide.

Let’s look at that Nationwide account in more detail, to consider whether it really could be a replacement for a savings account. 

You’ll get 5% AER in-credit interest for 12 months on balances up to £1,500, but you’ll need to pay in at least £1,000 a month. Bear in mind that after the year, the rate will drop to 1%, so then it might be worth switching to a higher interest current account. 

This current account also doesn’t have a monthly fee, so it would work well if you want to keep a portion of your pay in the current account but then move any extra money into a savings account. That way, you’ll be earning a competitive interest on both pots. 

Other current accounts to consider

Aside from Nationwide, you can also find a competitive interest rate with Kroo, which is a digital bank that’s been garnering more attention due to its current account. 

Kroo is currently offering a 4.10% AER (back in April it stood at 3.3% so it’s been moving with the base rate increases too) on a current account balance of up to £85,000, which is also protected by FSCS. You’ll get the interest monthly and there’s no fees attached, so it’s a great way to start earning interest without opening a savings account. 

Santander Edge Up is also offering 3.5% on balances up to £25,000 and you’ll get 1% cashback (up to £15 a month) on household bills. To unlock these benefits you will need to pay in at least £1,500 into your account each month and pay a £5 monthly fee to maintain the account. 

Are savings accounts still worthwhile?

So, there are definitely some current accounts in the market that are worth looking into in terms of their rates. Gone are the days when switching bonuses were the only thing to consider when changing a current account, as the data proves it’s a good idea to check interest rates too. 

But does that mean savings accounts aren’t worthwhile? 

Well, the interest on current accounts does have its restrictions, which means if you have bigger savings goals in mind, it’s still worth comparing savings accounts to make sure your money is working as hard as it can. 

It’s also worth saying that these are only replacements for easy-access accounts - with bigger rates available elsewhere for people prepared to lock their money away.

But for a large number of people - especially anyone with money sitting on 0% interest - there’s very little downside to moving to an account that pays you to bank with it instead.

*Our data excludes private bank accounts, existing customer deals and prepaid cards.