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How to get 5% interest without tying up your savings for years

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You don't have to put your money into a three-year fixed rate bond to get an inflation-beating return on your savings.

Rates on savings accounts are slowly improving but are still frustratingly low.

The best you can get on an instant access account is 1.5% from Marcus by Goldman Sachs.

This may be the best rate in years, but it’s still way below inflation, which currently stands at 2.4%, meaning money in all instant access accounts is losing value in real terms.

For an inflation-beating rate, you need to look to the longer fixed-term market and tie your money up for a minimum of three years.

Or you could switch to a high interest current account, some of which offer rates of up to 5% and crucially access to your cash.

The catch with these types of account is they come with strict criteria. For example, you have to deposit a minimum amount of money each month to qualify for the top rate of interest. And some require a certain number of direct deposits.

Rachel Springall, finance expert at Moneyfacts, said: “High interest current accounts are a great choice for any saver looking for a decent return on their cash but who also want easy access. So long as consumers can meet eligibility criteria, these accounts are a great choice when used efficiently.

“There is even an option of having more than one account in some cases, again if it is permitted in the terms and conditions of course.

“The main downside is if customers have a significant amount of cash to put to one side, as many of the leading high interest current accounts have a limit on the balance you can earn interest on.”

Here’s a rundown of the top high interest paying current accounts on the market:

Nationwide FlexDirect

This is one of two accounts paying a table-topping 5% interest.

This rate is paid on balances up to £2,500 (you can have more in your account, but you won’t get any interest on anything above £2,500).

This is an introductory deal so after 12 months the interest rate falls to 1%.

You need to pay in a minimum of £1,000 per month excluding transfers from any Nationwide account held by you or anyone else.

TSB Classic Plus

This account also pays 5% but on balances up to £1,500.

You need to deposit at least £500 a month and register for internet banking, paperless statements and paperless correspondence.

Tesco Bank Current Account

This pays 3% interest on balances up to £3,000, if a minimum of £750 is paid into the account and you have at least three direct debits going out each month.

Another benefit is the debit card also acts as your Clubcard, so for every £1 you spend on your debit card at Tesco, you’ll get two Clubcard points – twice as many as you’d normally get with a Clubcard.

Nationwide FlexPlus

With this account you get 3% interest on balances up to £2,500. There is no minimum deposit amount, but you have to pay a monthly fee of £13.

Some of the other benefits you get with this account are: family travel insurance, breakdown and recovery assistance, mobile phone insurance and free cash withdrawals abroad.

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