High interest current accounts explained
Are you interested in opening or switching to a new current account? You may want to consider a high interest current account. In this guide, Latest Deals explains what high interest bank accounts are, where you can find them, and answers any questions you may have.
What is a high interest current account?
A high interest current account is a current account that pays a competitive interest rate on your in-credit balance, compared to other current accounts.
This means that you’ll earn a percentage amount of your account balance on top of your money. The higher the percentage is, the better the return you’ll make on your money. So, it’s worth taking the time to find a high interest current account if you want to earn money on your current account balance.
High interest current accounts can be hard to find, but they are offered by certain high street banks and building societies. However, some high interest current accounts come with limitations.
Examples include caps on the amount you can earn interest on, for example you can only earn it on the first £1,000, or you may need to pay in a certain amount of money each month to qualify.
High interest current accounts often charge high overdraft interest rates. So, if you think there’s a chance you could go overdrawn, you may want to consider a different current account.
High interest current accounts pros and cons
There are positives and negatives with high interest current accounts. These include:
| Pros | Cons |
| Earn interest on your current account balance | Caps on how much money you can earn interest on |
| You’ll have access to your money (unlike with some savings accounts) | There may be strict criteria to qualify |
| You may be able to find a high interest current account with a better rate than some savings accounts | The high interest rate may be for a limited time only |
| You may get eligible for a linked savings account with a good interest rate | You’ll have access to your money, so it’s easier to spend rather than save |
| Some accounts offer incentives for switching to them | If you go overdrawn, overdraft interest rates on high interest accounts are usually high |
Which current accounts pay interest?
Generally, current accounts don’t pay interest, or offer very low rates on the money you keep in them.
However, there are some that pay competitive interest rates, and sometimes their rates can be higher than some savings accounts, for example easy access savings accounts.
Here are some of the high interest current accounts available at the moment from some of the most popular UK banks. The examples below are available for adults and come with no monthly fees:
Virgin Money M Plus Account
The Virgin Money M Plus Account is a high interest current account that offers 2.02% AER interest on your in-credit balance up to £1,000.
There are no monthly fees for this account, and Virgin Money offers online and mobile banking services through their app. So, you can manage your money through a device, mobile or desktop if you want to.
Other perks of the M Plus Account include fee-free card payments abroad, the possibility of linking a savings account, the M Plus Saver, at 0.35% AER interest, and Financial Services Compensation Scheme (FSCS) protection (this protects your money up to £85,000).
You can apply for an arranged overdraft with the M Plus Account, and interest fees range from 19.9% - 39.9%.
To qualify for this account, you need to be eighteen and have a good credit history. There are no monthly fees, minimum monthly deposits or minimum number of direct debits required with this account.
Nationwide FlexDirect Account
The Nationwide FlexDirect Account offers 2% AER interest on your in-credit balance up to £1,500 for the first year. After this introductory period, the rate will drop to 0.25% AER. You can also get an interest-free arranged overdraft for the first year, and then the interest rate will rise to 39.9% APR.
Nationwide has online and mobile banking services, so you can manage your finances online or on your phone through their app, if you want to.
The FlexDirect account comes with no monthly fees, and is available as a joint account. However, you’ll need to deposit a minimum £1,000 per month to earn the interest.
To apply for the Nationwide FlexDirect account, you’ll need to be eighteen or over, a UK resident, have no more than four existing joint or single Nationwide current accounts, and be using the account for personal use.
With this account, you’ll get high interest and no overdraft fees for the first year. So, you may want to open the account and then switch to a different account once the year has ended and you lose these perks.
Bank of Scotland Classic Account
The Bank of Scotland Classic Account has a free add-on feature called Vantage. With Vantage, you can earn 0.6% AER interest on your in-credit balance between £1 and £3,999, and 1.5% AER on your in-credit balance between £4,000 and £5,000. You won’t earn interest on any balance over £5,000.
You can add Vantage for free when you apply for the Bank of Scotland Classic Account, however there are some terms you need to meet, unlike with the other examples.
There are no monthly fees with this account. But, to earn the interest, each month you’ll need to pay at least £1,000 into the account, stay in credit (this means your balance can’t drop below £0), and pay out a minimum of two different direct debits.
You can apply for an arranged overdraft with this account, and if you’re successful the interest rate will be 39.9% EAR.
You can manage the Classic Account through online or mobile banking with the Bank of Scotland app, or you can visit your local branch for in-person help and advice.
Starling Bank Personal Current Account
The Starling Bank Personal Account offers 0.05% AER interest on in-credit balances up to £85,000.
This is a free account with no monthly charges, and Starling Bank is a digital bank. This means that you bank exclusively online through their mobile app or on a desktop computer. There are no physical branches for in-person help or advice. You can read our guide on Starling Bank here.
An arranged overdraft with this account comes with an interest fee of 15%, and perks include fee-free spending abroad, tools to help with budgeting and saving, and instant spending notifications to help you keep track of your money.
To open a Starling Bank Personal Account, you’ll need a smartphone and internet access, valid photo ID, and five minutes to go through the application process.
Best high interest current accounts
Here is a comparison table of some of the high interest current accounts available for adults at the moment. Some of the accounts below have fees, and some do not, and all the information is listed below:
| Provider and account | Interest on balance | Overdraft interest rate | Fees & requirements |
| Virgin Money M Plus Account | 2.02% | 19.9% - 39.9% | None |
| Nationwide FlexDirect Account | 2% for 12 months then 0.25% | 0% for 12 months then 39.9% | - Minimum £1,000 deposit per month |
| Bank of Scotland Classic Account | 0.6% - 1.5% | 39.9% | - Minimum £1,000 deposit per month - Minimum of 2 monthly direct debits - Must stay in credit |
| Starling Bank Personal Current Account | 0.05% | 15%, 25% or 35% | None |
| Club Lloyds Account | 0.6% - 1.5% | 29.9% | - Minimum deposit of £1,500 per month - £3 per month if you don’t meet this deposit - Minimum of 2 monthly direct debits |
| Santander 123 Current Account | 0.3% | 39.94% | - £4 monthly fee - Minimum £500 monthly deposit - Minimum 2 monthly direct debits |
How to make the most of a high interest current account
Here are some tips to help you make the most of a high interest current account:
- Choose the highest interest rate
Firstly, you should choose the current account with the highest interest rate. You can use our table to compare accounts that offer interest with no monthly fees. There are other accounts available that offer interest on your balance, but they may come with fees, or have age restrictions. You can read more about bank accounts for teenagers here.
The highest interest rate will get you the best return on your money. So, you should pick the highest rate available, as long as you’re happy with the other terms of the account.
- Check the current account requirements
If an account has restrictions that don’t work for you, monthly charges, or punishing overdraft fees, it may not be the right choice for you, even if it offers a high interest rate on your balance.
It’s important that you check the terms of the account carefully, and check that you’re happy with them, and that you can meet them.
For example, some accounts have tier interest systems. This means that you’ll need to have a certain amount in the account to earn the headline interest rate.
Or, you may need to do certain things each month to get the interest. Examples are making a set number of payments or direct debits, or depositing a minimum amount.
- Check for incentives before switching bank accounts
Banks often offer incentives for switching accounts. So, if you’re switching to a high interest current account, you may be able to get a reward for doing so.
When comparing switching rewards, you should check for any terms and conditions attached to them.
We have a guide on switching bank accounts here.
- Set up multiple high interest accounts
Most high interest current accounts will only pay interest on a certain amount of money. For example, the Virgin Money M Plus Account pays 2.02% AER interest on your balance up to £1,000.
So, you can open multiple high interest current accounts to earn interest on all of your money. How many accounts you need will depend on how much money you have, and how much money your account allows you to earn interest on.
The aim is to ensure that you don’t have any money that you’re not earning interest on.
IMPORTANT NOTE: If you’re spreading money across multiple high interest current accounts to maximise your return, make sure you start with the account with the highest interest rate. So, fill that account first up to the amount you can earn interest on, then go to the account with the next highest account and so on.
- Be wary of going overdrawn
High interest current accounts are beneficial as you can earn interest on your money. However, the downside is that they often come with tough overdraft fees.
If you open a high interest current account, you should be wary of using your overdraft, as you’ll likely be stung by these high fees.
You can learn more about overdrafts here.
How to switch to a high interest current account
If you’re not happy with your current bank account and want to switch to a new one, perhaps one that offers high interest on your balance, you can switch current accounts.
Switching bank accounts is fairly straightforward. Once you’ve found an account and provider you want to switch to, you can use the Current Account Switch Service (CASS). This free service will set up your new account and transfer all your details across. It will also close your old bank account for you. The process generally takes up to seven days.
You can learn more about how to switch your bank account here.
Can I use a high interest current account for saving?
Yes, you can use a high interest current account for saving. There are some benefits to a high interest current account compared to a savings account, but it will depend on what you’re looking for.
Other than easy access savings accounts, there are often limitations on accessing your money with savings accounts. With a high interest current account, you’ll have access to your funds.
However, some high interest current accounts will come with restrictions that you won’t get with savings accounts. For example, only earning interest on a set amount of money, having to pay a certain number of direct debits monthly, and so on.
Also, if you struggle with saving, having all your money accessible in your current account may not be the best idea.
Remember, you can open multiple current and savings accounts. So, if you take the time to compare accounts and find the ones that suit your circumstances, you can utilise both.
You can learn more about savings accounts here.
Alternatives to high interest current accounts
If you’re looking to keep your savings somewhere long term, or you’re worried about spending your savings if they’re in your current account, a high interest current account may not be for you.
There are other options though, in the form of savings accounts. There are different types of savings accounts, so you should be able to find an account to suit your needs.
Generally, the more restrictive an account is, the better the interest rate will be. We have a guide that explains the most common types of savings accounts here.
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