Make your bank pay for your custom
N.B Ignore this article if you either have less than £500 coming in each month or don't want to pay to have a bank account. If you've got a healthy incoming cash flow then there are lots of great current accounts that give you much more than the measly 0.1% AER interest that standard current accounts pay. If you don't want to pay for your account but you've got lots coming in each month, you can get anything from a 12.00% AER rate of interest, to free travel insurance. However, if you are willing to pay a bit each month, some bank accounts offer decent discounts on financial products, good savings rates, all kinds of insurance and extra freebies. The best one for you depends on what you need. Some paid-for accounts though, are simply bad deals so avoid those! Here's our guide to the best accounts around and how to get yourself one. What type of current accounts are on the market? Free current accounts A lot of free current accounts are bog-standard accounts that offer pathetic rates of interest but have no minimum monthly deposit. These accounts are not very exciting and if you're looking to make your money work for you, these should be avoided. The really exciting current accounts are those that give you brilliant interest rates in return for a high minimum monthly deposit, usually between £500 and £2,500. There are limits to the generosity of banks and so these interest rates often only count towards the first £2,500 in your account. After this they go back to the measly 0.1% that is standard for current accounts. Some of these accounts offer low rates on your current account balance but allow you to open a savings account with a very high interest rate at the same time. They then arrange for a set amount to be transferred to this savings account each month from your current account. Lots also offer some sort of interest-free overdraft, which is great if you fall into the red occasionally. However if you are not in credit, this type of account is fairly pointless as you aren't going to make much interest, and the free overdraft facilities certainly don't last forever. Current accounts that cost Current accounts that you have to pay for work on a similar basis. They give good rates of interest and include added bonuses like free travel insurance, preferable rates on other financial products, mobile phone insurance and discounts on other services. But instead of having to pay a minimum monthly deposit, you have to pay a monthly charge. Who should get one? To get a high-interest current account you'll need a decent amount of money coming in each month. The minimum monthly deposit is usually no less than £500, but to get the best deals you'll really need to pay in £1,000 upwards. The benefits of these accounts are really tailored to people that spend most of their time in credit. So you need to be someone with a good monthly income who manages their money so that they are in the black most of the time. You'll also need to be good with hunting down deals, as the high interest rates tend to be for a set period only. So you've got to have the energy to shop around for a better deal in a year.
If you don't have more than £500 coming in then you simply won't be able to get a high- interest current account. However, you can pay between £5 and £20 a month and get the same benefits with a paid-for current account. Although this monthly payment is relatively low, you need to be sure it's worth your while. If you're looking for high-interest rates, but you don't have enough income to get a free high-interest account, you probably won't make enough on your balance to make it worth paying for one. But if you are more interested in the insurance and added benefits then it might be worthwhile.
What are the best free high-interest current account deals?
These are the main players in high-interest current accounts at the moment: Alliance & Leicester Premier Direct current account - A whopping 8.5% AER on the first £2,500 in your account, after which you get 0.1% AER
- 0% AER overdraft up to £2,500 (for the first 12 months)
- £500 minimum monthly deposit
Alliance & Leicester Premier current account - 1.0% AER on balances up to £2,500
- 12.0% AER on a linked Premier Regular Saver account for 12 months, into which you can deposit between £10-£250 per month
- Free European Travel Insurance for under 65s
- Minimum monthly deposit £500
First Direct 1st Account - 0% AER on current account balances
- 8% AER on a linked Regular Saver account for 12 months, into which you can put between £25 and £300 on the same day each month
- Get £100 when you change to First Direct
- Minimum monthly deposit £1,500
- Can link your 1st account with an offset mortgage plan
The Abbey current account - A very reasonable 8% AER paid on balances up to £2,500 and then 2.5% AER on balances above £2,500 (for the first 12 months) if you switch your current account to Abbey
- £1,000 minimum deposit
- No overdraft option if you want to keep your 8% AER
- If you keep your current account at another bank and simply open another one with Abbey you'll only get 8% AER on the first £1,000 in your account
Halifax high-interest current account - 6.17% AER on balances up to £2,500 and then 3% AER thereafter
- £1000 minimum deposit per month
- Interest penalties if you don't pay in the minimum two months in a row
Coventry Building Society - Only 5.46% AER
- But this is on a maximum of £250,000
- £250 interest free overdraft
Lloyds TSB Classic Plus account - Limited offer of 6.00% AER if you apply for a Classic Plus account before the 13th of July
- This includes a 2% bonus rate for 12 months
- Interest is payable on balances up to £2,500
- Minimum deposit £1,000 per month
Alliance & Leicester Premier 21 - For young adults aged between 16-20 who are in employment
- Must pay in any income
- 10% AER on the first £1000 in your account for 12 months
- 0.10% AER on balances about £1000
- Visa Debit card
- Must have a good credit record
What are the best paid-for current account deals? Bonus current accounts are really only just getting started and so what the different banks offer is not standardised, and neither are the prices. Here are a few to give you an idea of what to expect. Halifax Ultimate Reward current account - £10 a month.
- 6.17% AER on balances up to £2,500
- You will get free family travel insurance, interest free overdraft up to £300, breakdown cover, mobile insurance, discounts on Halifax financial products and other discounts for services like car rental and entry to theme parks
- No minimum monthly deposit
HSBC Bank Account Plus - £12.95 a month
- 8% AER on balances up to £1,000
- Free travel insurance and preferable rates on other HSBC financial products
- 10% annual refund on credit card interest if you have an HSBC Mastercard
- 8% AER on HSBC's Savings Account for Children for 12 months on balances up to £1,000
Alliance and Leicester Premier 50 - £10 a month
- For customers over 50 years of age
- 8.5% AER on balances up to £2.500 for 12 months
- 0.10% AER on all balances above £2,500
- Free annual travel insurance for customers aged 79 years and under
- Exclusive health benefits - private outpatient diagnostics and consultancy
Barclays Additions Active - £14 a month
- 3.00% AER
- Interest free overdraft up to £300
- Worldwide multi-trip travel insurance
- RAC comprehensive breakdown insurance
- Mobile phone insurance
- Extended warranty on electrical items
- Cardholder protection
Lloyds TSB Added Value Accounts Lloyds has a range of current accounts with extra benefits. Until the 13th of July you can opt to choose the plus version of all of them and get 6.00% AER on current account balances up to £2,500. This includes a bonus rate of 2% for 12 months, so after a year the rate will drop to £4.00%. To qualify for the plus versions you must have at least £1000 coming in each month. The other benefits are: Silver - £2 per month for the first three months and then £7.95 per month
- For this you get annual travel insurance, mobile phone insurance, AA breakdown cover, Sentinal card protection, Airmiles and travel money card.
Gold - £7 per months for the first three months and then £12 thereafter
- You get all the silver benefits (minus the travelmoney card for some reason) plus a free planned overdraft and the Save My Numbers feature.
Platinum - £10 a month for the first three months and then £17 thereafter
- You get all the gold benefits plus airport lounge access or aiport meet and greet.
Premier - £15 a month for the first three months and £25 thereafter
- You get all the Platinum benefits plus a limit alert service.
How do I decide?
The high-interest accounts are fairly straightforward; if you've got the incoming funds then you can get some impressive interest payments, so go for it. However, choosing between the paid-for current accounts is more difficult because they are all so different. They do offer benefits like free insurance, but you might be able to get cheap insurance elsewhere for the same price (in fact, check out our insurance comparison service for the best). However, if you are going to be using other financial products, one of these accounts could be a great way to get a better deal; which is always a bonus at a time when the economy is slowing down.
Useful links Related articles
|
Print this page
