Current Accounts Become a Salvation for UK Savers

By: MoneyFacts

Rachel Springall, Finance Expert at Moneyfacts.co.uk, comments:

“In the past, current accounts paid less favourable rates of credit interest than standard savings accounts, but today, things couldn’t be more different.

“Savers can earn over three times more interest using a current account compared with the best easy access account on the market.* For this reason, it wouldn’t be surprising if savers flock to these accounts and abandon standard savings accounts altogether.

“A balance of £2,000 could earn savers £97.80 in interest per year with TSB’s Classic Plus account, while a balance of £20,000 with Santander could see them pocket £592. Meanwhile, RCI Bank UK’s Freedom Savings Account, which is the best easy access account on offer today, would earn savers a paltry £30 and £450 respectively in equivalent interest per year.**

“The attractive interest rates aren’t the only perk offered by current accounts. For example, savers can also take advantage of lucrative switching incentives. Clydesdale Bank and Yorkshire Bank give switchers £150 in cashback, which means that their customers can earn a total of £209.40 in the first year from interest gained on a £3,000 balance plus the switcher incentive. **

“Once providers have succeeded in getting a new customer on board, they can also offer them a raft of different products in their range, some of which are unavailable to non-banking customers. For instance, M&S Bank and first direct offer higher interest rates of 6% on their regular savings accounts when they are linked to their current accounts.

“Current accounts are evidently a salvation for savers in the current low-rate environment, and when used right, can be treated just like an ordinary easy access account. However, in order to make the most of current account interest rates, savers must ensure that they abide by the rules - breaking any agreements will mean that the deal is snatched away and any advantages will be lost. It’s therefore important to keep track of all transactions on a regular basis.”

AMENDMENT – Santander pays 2.98% up to £20,000

*TSB currently offers 5% on its Classic Plus account, compared with the best easy access account offered by RCI Bank UK, which pays 1.50%.

**Calculated figures are on a gross basis, based on interest earned in the first year. See the attached table for more details.

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