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Grab £100 just for switching your current 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 5.00% 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.

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.

• What type of current accounts are on the market?
• Who should get one?
• What are the best free current account deals?
• What are the best paid-for current account deals?
• How do I decide?

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 current account deals?

These are the main players in high-interest current accounts at the moment:

First Direct 1st Account – £100 just for switching

• Get £100 when you switch to the 1st Account and pay in at least £1,500 each month.
• If you’re not satisfied with the account after six months, First Direct will pay you another £100 and help you move your money elsewhere.
• Get an interest-free overdraft of £250.

Halifax Reward Current Account – earn £5 per month

• Put in £1,000 each month and they’ll give you £5 each month.
• An arranged overdraft of up to £2,500 costs £1 per day.

Lloyds TSB Classic Vantage account – earn up to 3% AER

• Get 1.5% AER if your balance is below £1,000, 2% AER between £1,000 and £3,000 and 3% AER interest is payable on balances up to £5,000.
• Minimum deposit £1,000 per month.

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.

Barclays Current Account Plus

• £6.50 fee a month, but includes benefits such as mobile phone and gadget insurance.
• Interest-free overdraft up to £300.
• 18.3% AER typical variable on agreed overdrafts between £301 and £5000.
• Cardholder Protection that covers you against the loss or theft of your cards and passport.
• Extended warranty cover for your domestic appliances.

Halifax Ultimate Reward Current Account

• From £1o per month, with annual benefits including AA motor cover and worldwide multi-trip family travel insurance.
• It will cost £10 a month if you pay in more than £1000 per month, if you pay in less than £1000 it’ll cost £15 per month.
• Interest free £300 arranged overdraft.

thinkbanking managed account

thinkbanking offer a managed bank account with a personal budgeting service. That means that your account monitors your balance and upcoming Direct Debits/standing orders and alerts you if you don’t have enough money to cover the payments.

Why we like it:

• It’s ideal for those who have previously been refused an account because of poor credit – as it doesn’t require a credit check.

• There’s a flat monthly fee of £14.50 and an initial set up charge of £25, but are no other hidden or penalty charges.

• It offers text, online and telephone banking, and a Mastercard debit card.

Lloyds TSB Added Value Accounts

Lloyds has a range of current accounts with extra benefits. You can opt to choose the Vantage version of all of them and get up to 4.00% AER on current account balances of between £5-7,000. To qualify for the Vantage versions you must have at least £1,000 coming in each month. The other benefits are:

Silver

• £3 per month for the first two months and then £9.95 per month.
• For this you get annual travel insurance, mobile phone insurance, AA breakdown cover, and Sentinel card protection.

Gold

• £12.95 per month.
• You get all the silver benefits plus a £100 interest-free planned overdraft and a £10 overdraft buffer.

Platinum

• £12.95 per month for the first two months then £17 a month thereafter.
• You get all the gold benefits with a £250 interest-free planned overdraft.

Premier

• £17 a month for the first two months and £25 thereafter.
• You get all the Platinum benefits plus a £500 interest free overdraft.
• Free home emergency cover and identity theft protection.

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 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.

Step one: Check your banking habits

Is your current account generally in credit? Then you need one that gives you a decent interest rate. An average current account offers an interest rate of just 0.1% but some will offer more than even some top savings accounts.

If you tend to use your overdraft regularly then it makes sense to go for an account that has low charges for overdrafts. See our recommendations here for current accounts with low overdraft charges.

If you are currently overdrawn, and you can’t pay the whole lot off yet, you may still be able to switch your account. It depends on your circumstances, your credit rating and the attitude of the bank you want to move to.

Certainly give them a try, although it would be best to go through step two before you do.

However, if you are not so bothered about a few pounds here and there and the most important thing to you is the level of service you are going to receive from your bank, then you should ask around your friends and family to find out who is actually happy with their bank (very few are) and which one they use.

Step two: Check your credit record

All banks will look at your credit rating before granting you a current account – particularly if you want an overdraft facility.

It’s free and it will give you a good picture of how ‘viable’ the banks think you are. Another very good reason to check it is to make sure that it has your details correctly logged.

Go to Experian’s homepage, where there is a blue box entitled, “30 Day Free Trial”. Click on that box which will take you through to the registration page.

Now do this:

1. Complete the registration.

2. Note your details, including the credit file reference number.

3. Your PIN should arrive in the post in several days.

4. Use the PIN to log in online and check your credit record.

5. Inform CreditExpert of any inaccuracies.

6. Cancel your membership (so you don’t forget or get charged anything) by phoning 0800 656 9000 and selecting Option 4. You can email, but these are your bank details, so it’s better to speak to someone on the record.

Step three: Consider the extras

Do you need to have a branch nearby? Do you need internet banking and 24-hour customer service (most offer at least the internet side of it)? Make sure the bank you want to move to has enough accessibility for you.

Banks always try to get you to take out one of their premium accounts (with, maybe, a gold-coloured card and ‘extras’ like travel insurance) but most are nowhere near worth the monthly fee (usually about £10-12).

In fact, if you play your cards right and keep on top of your account by regularly checking it online or by phone you should be able to get free banking plus some interest each month. That’s better than most bank customers around the world get so make the most of it.

Useful links

• First Direct 1st Account
• Lloyds TSB Classic Plus Account
• Halifax Reward Current Account