Best High-Interest Current Accounts

We selected the best interest-bearing checking accounts.

Updated: May 18, 2024
Matt Crabtree

Written By

Matt Crabtree

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Current account in-credit interest has not significantly increased despite the rise in savings rates. Actually, very few financial institutions provide interest on checking accounts by crediting the account holder directly. 

The Bank of England estimates that a massive £230 billion is sitting in zero-interest sight deposits, which are effectively current accounts. 

That is a lot of money compared to the total amount in the fixed-rate savings market (not including Isas). Some individuals may place a premium on maintaining a large amount in a checking account, and such people might benefit from interest payments. 

To help, we compiled a list of the top checking accounts that pay interest on balances.

ProviderScoreDetails
1. Nationwide★★★★★Click Here
2. Kroo★★★★★Click Here
3. Santander★★★★★Click Here
4. Lloyds Bank★★★★Click Here

At a Glance — Pros and Cons

This section covers the pros and cons of top high-interest current accounts in the UK.

Pros

✅ The rate of return may be higher than that offered by conventional savings vehicles.

✅ Easy access to your money, just like a regular checking account.

✅ Most savers will not be subject to taxation on interest income due to the Personal Savings Allowance.

✅ With many accounts, you may get perks like cash back, no foreign transaction fees, and gift cards.

Cons

❌ Conditions and restrictions may be stringent.

❌ In most cases, the interest rate is only high for a short time and/or up to a certain cap.

❌ After the introductory period of high interest ends, the rate may be lowered immediately.

❌ When depositing big sums of money, this may not be the ideal solution, and overdraft fees might be exorbitant if your account balance drops below zero.

Top high-interest current accounts — Reviews

The Financial Services Compensation Scheme (FSCS) safeguards deposits at UK-based banks. If a bank fails, the FSCS will reimburse customers up to £85k per individual, per bank, and up to £170k for couples.

1. Nationwide — Highest high-interest current accounts provider (5%)

We’ve plopped this into first position because you’ll find a market-leading 5% initial in-credit interest rate available if you choose to use Nationwide‘s fee-free FlexDirect current account.

And for the first 12 months, new applicants can get a preferential rate on balances up to £1,500. If you retain at least this amount in the account each year, you will get £75 in interest.

Unfortunately, this pricing is not available to anybody who has ever had a FlexDirect account.

If an applicant has only ever had a solo account, they will not be eligible for the introductory rate on a joint account, and the same is true if they have only ever had a joint account.

Transferring at least two current Direct Debits from your old account to your new one using the Current Account Switching Service (CASS) is required for this promotion. This will be handled mechanically by CASS.

Holders must make monthly deposits of at least £1,000 to earn in-credit interest.

Nationwide will compute daily interest on the last day of each month and pay it out on the first day of the next month. However, they will not earn interest for the month if their income is less than £1,000. The introductory 5% discount will expire after 12 months. After then, it falls to a mere 0.25 per cent. After a year, you may want to search elsewhere for a higher return on investment.

2. Kroo — Top high-interest current account for digital-only (4.1%)

All-new, fully-digital financial institution Kroo has made interest accrued on in-credit balances a key selling point in its marketing efforts.

Currently, balances up to £85,000 qualify for the promotional interest rate of 3.6%. As of July 1st, this will increase to 4.1%. With a return of 4.1%, it would fall short of the current best-purchase easy-access savings account by just 0.2%.

If the Kroo interest rate stays the same, a Kroo account holder who leaves £5,000 in it for a full year will get an additional £205.

In 2016, the company Kroo was established as a legitimate online bank. In 2022, it received its full UK banking license. Customers of the app-only bank, which introduced its first current account in December, are completely insured by the Financial Services Compensation Scheme and the bank is one of only three to earn a full UK banking license since 2016.

Banking on its reputation as a “socially conscious” institution and its promise to plant two trees for every new account, the bank hopes to reach its goal of planting one million trees this year.

Kroo's checking account offers a competitive interest rate in addition to convenient features like bill splitting, budgeting, and account sharing. There are no foreign transaction fees while using the debit card, and the annual percentage rate (APR) for overdrafts is cheaper than at most traditional banks.

Customers who are interested in the Kroo promotion are not required to utilize the bank's current account switching service. Since there are no minimum deposits or other criteria to open an account, it might be utilized as a simple savings vehicle.

Users who want to make a change will first need to download the mobile app and complete a brief (5-10 minute) registration procedure.

3. Santander — Top UK high-interest current account

Santander now offers a checking account called Edge Up, which offers 3.5% APY on balances up to £25k.

This means that after a year, someone who keeps the maximum amount will have earned £875. If the interest rate on a £5k amount stays the same for the following year, the account holder could earn £175.

Its new account provides 1% cashback on debit card purchases made at supermarkets and on public transportation, up to £15 a month. It provides an additional 1% return on utility bills, up to £15 every month. Everything from utility bills to cable and satellite TV subscriptions counts as part of this category. 

Its debit card, in contrast to those of several of the major high street banks, will not incur any fees when used abroad. 

Despite its many advantages, prospective clients should be aware of a few caveats and fees. To begin with, there is a recurring fee of £5 per month, or £60 per year. Both a monthly minimum deposit of £1,500 and two automatic payments from the account is required of all customers.

4. Lloyds Bank — Solid high-interest current account provider

Up to £5k in balances are eligible for interest payments from Club Lloyds. It offers a 1.5% return on the first £4k and a 3% return on the next £4,000 to £5,000. Amounts more than £5,000 will not accrue interest.

With a minimum annual deposit of £5k, account holders are eligible to get up to £90 in credit interest. Lloyds may be interested, but not because of the in-credit interest. Club Lloyds is presently offering a £150 incentive to new customers who transfer over to their accounts.

In addition, customers may add on a year of Disney+, six movie tickets to their choice of a Vue or Odeon theatre, a magazine subscription, or a membership to the Coffee Club and Gourmet Society. 

Someone who subscribes to Disney+ might potentially save £79.90 per year. Similarly, an adult ticket at a Vue theatre would set you back roughly £11 or £12. Over the course of a year, it could amount to a savings of £72 on movie tickets.

The monthly maintenance cost of £3 is refunded to account holders every month they deposit £2,000 or more.

The top high-interest current accounts — Buying Guide

Let’s explore these services further as a topic. 

What is a high-interest current account?

Your credit amount in a high-interest current account earns interest. The amount of money you have access to in your bank account is known as your credit balance.

Your primary bank account is called a “current account”. It is the kind of account most people have their paychecks deposited into, thus it comes with a debit card and can be used for everyday purchases. The interest rate on a typical checking account is almost zero.

Using a high-interest checking account, you can access your funds whenever you need them and make purchases using a debit card. The largest perk, though, is the income you may receive by banking on your money. Your bank will notify you in advance if this rate changes from its current fixed-rate term into a variable-rate one.

What is the logic behind high-interest checking accounts?

How you use your high-interest accounts is comparable to that of regular checking accounts; however, interest accounts often have additional limitations and requirements than checking accounts.

Before enrolling for a high-interest checking account, it is wise to conduct some research and comparison shopping to be sure you are getting the best deal and are eligible for the account in question. High-interest checking accounts often have:

  • Deposit requirement. The minimum monthly deposit required to earn interest on a checking account is currently set at £1,000.
  • Cap on the interest rate's high side. There might be a cap on the interest rate's applicability, below which your balance would not earn any interest for a certain time frame. For the first 12 months, for instance, you will earn 2% interest for your initial £1,500.
  • Money in the account must accumulate. People who regularly carry a balance into the next statement cycle are the typical targets for interest current accounts. An overdraft will not earn interest.
  • Limits based on age. Under-18s and students have access to some of the highest-interest checking accounts.
  • Bank charges. Some high-interest accounts, in contrast to many regular checking accounts, charge a regular fee. 

How are interest rates calculated?

The interest rate is the ratio that a bank pays its depositors on their savings accounts.

The AER is the rate used to compare different types of interest on current accounts. The annual percentage yield is the rate at which interest get accrued.

Your annual percentage yield might be static (constant) or dynamic (changing) depending on the kind of high-interest account you choose. The Bank of England base rate has an effect on the annual percentage rate offered by banks. 

Low base rates are bad for savers because they force banks to pay out less interest on deposits. Higher interest rates on savings accounts are often available to customers when the base rate increases. If your transaction has a variable AER, your interest rate may rise or fall with the benchmark rate.

When analyzing interest rates, it is also important to include the rate of inflation. What this means is that prices tend to rise by an average of X% per year. Your purchasing power will decrease year over year if the interest rate is below the rate of inflation.

You should seek a savings account with an AER that is greater than the rate of inflation.

Leading high-interest current accounts: The Verdict

People are becoming more aware of the returns their money may be making as interest rates rise.

While it is true that many people put aside money for rainy days in savings accounts, there is also a lot of money sitting in banks earning next to nothing.

Nationwide's examination of Caci data reveals that the average balance in a current account is £5,700.

How complicated is it to change banks?

Changing your bank account is a breeze with the help of the Current Account Switch Service. Your account will be transferred to the new institution within a week, and the service is accepted by almost all building societies and banks. 

Once your application has been processed and approved, your new bank will transfer your funds, process any outstanding payments, and close your old account. Your bank information and new debit card will be sent to you automatically.

It used to be simple to open a checking account that rewarded you handsomely for maintaining a positive balance. Although difficult to come by, they are not extinct and often provide a higher interest rate than the best quick-access savings accounts. But even the greatest high-interest checking accounts available today will not be able to help you significantly increase your funds.

You should also know that these accounts often have a minimum monthly deposit requirement before they will begin paying interest and a maximum monthly deposit amount on which interest will be paid. Keep in mind, though, that the enticingly high-interest rate is sometimes only an introductory offer meant to bring in new business.

A high-interest current account might be useful if you only save a little amount each month but still wish to earn money. A traditional savings account may be more beneficial if you can and will save more money regularly.

The only savings accounts that can compete with high-interest checking accounts are those that cater to regular savers. You can normally put away a particular amount every month for a whole year. These accounts are similar to high-interest checking accounts in every other respect; the only difference is that your savings are maintained in a separate account where you will not be tempted to spend them.

However, there are limitations to these types of accounts as well. Similar to a fixed bond savings account, you will not have access to the funds until the maturity date.

For more, see our top savings accounts.

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FAQs

Can you recommend a good high-interest checking account?

What about joint checking accounts?

If I have a low credit score, can I still get a high-interest checking account?

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