You are here: Home - Saving & Banking - News -

Brits earn more by saving with a current account

0
Written by:
07/03/2016
Interest rates on savings products are so pitiful that Brits are earning more from their current accounts, research reveals.

Top paying current accounts offer three times as much as leading easy access savings accounts or instant access ISAs, according to analysis by MoneySuperMarket.

Both Nationwide and TSB offer current accounts with in-credit interest rates of 5% whereas the leading easy access account from RCI Bank pays just 1.55% AER.

Nationwide’s FlexDirect account offers 5% AER on balances up to £2,500, while TSB’s Classic Plus Account also offers the same rate on balances up to £2,000.

Alternatively Santander’s 123 account pays 3% AER on balances between £3,000 and £20,000, making it a good option for anyone with a larger savings pot, though it has a £5 per month fee.

ISAs are not better

Savers hoping for a better return with an ISA will be disappointed too.

The best paying instant access ISA from the Post Office offers just 1.45% AER, again more than three times less than the top paying current accounts.

Fixed term ISA rates fare slightly higher, though still don’t match those of the leading current accounts. Aldermore pays 1.5% AER on its one year fixed, the State Bank of India’s three year fixed comes with 2.3% AER and First Save offers 3.06% in interest on its five year fixed deal. The best Help to Buy ISA deal is through Halifax, which pays 4% AER.

The new Personal Savings Allowance (PSA) – coming into force from 6 April – will make putting money into savings products more attractive.

Under the PSA, basic rate taxpayers (20%) will be able to save £1,000 tax free and higher rate taxpayers (40%) will be able to save £500 tax free. Additional rate taxpayers (45%) are not eligible for the allowance.

Kevin Mountford, banking expert at MoneySuperMarket, said: “Banks have upped their current account interest rates in recent years in order to create more competition within the market and attract customers. It’ll be interesting to see how the new personal savings allowance, being introduced in April, will prompt people to reconsider their savings habits.”

One warning to mention. Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount or cap the balance for which interest is paid, while some market leading savings deals have restrictions, so it is important know what those may be before you make the switch.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week