Britain's Best Bank Accounts

If you'd like an interest-free overdraft for a year, plus fifty times as much interest when you're in credit, check out these cracking current accounts!

It's at this time of year that bank customers receive their tax certificates, which inform them of the interest that they've earned and the tax deducted in the previous tax year.

I was quite pleased to see that my current account paid me credit interest of almost £110 before tax in the last tax year (which ended on 5 April). However, the taxman automatically grabbed a fifth (20%) of this, or £22, plus I have to pay a further £22 via my tax return, because I'm a higher-rate taxpayer. Even so, in effect, I've been paid about £5.50 a month to use my current account, which is better than a poke in the eye with a sharp stick!

However, I could have earned up to 2½ times as much interest, because my bank account only pays a credit interest rate of around 2% a year, whereas a few Best Buy accounts pay more than double this rate. Thus, with the right account, I could have earned a total of £165 after tax last year, or £99 more, which is well worth having!

Best Buys for credit interest

According to the Fool's search wizard, which is powered by independent financial researcher Moneyfacts, these are the Best Buy current accounts for customers who generally stay in the black (i.e. avoid going overdrawn):

Bank/ Account name	Pre-tax interest rate (% AER)	Minimum Funding/ Comments
Coventry BS First	5.10	£1,000pm Includes 0.85% bonus for a year
Alliance & Leicester Premier Direct Current	5.00	£500pm 0.10% paid on balance over £2,500
Nationwide BS FlexAccount	4.25	£1,000pm 0.25% paid on balances over £3,000
Lloyds TSB Classic Plus	4.00	£1,000pm 0.10% paid on excess balance over £5,000
Cahoot Current	3.75	-
Smile Current	3.04	-

Best Buys for overdrafts

These days, I'm a happier banker than I've ever been, partly because I've spent three years in the black. Indeed, I haven't gone overdrawn by even a single penny since early 2003, which is a far cry from the dark days when my account was only in credit for a few days after each payday, if at all!

However, if you occasionally slip overdrawn, or your account is mostly in the red, then find an account which doesn't charge sky-high interest rates for both authorised and unauthorised overdrafts. Again, here are the Best Buys, taken from the Fool's Moneyfacts-powered search engine:

Bank Account name	Authorised borrowing (% EAR)	Unauthorised Borrowing (% EAR)	Minimum Funding/ Comments
Alliance & Leicester Premier Direct Current	0.0	5.90	£500pm; 0% on up to £2,500 for a year, then 5.9%
Barclays Bank Account (Option A)	0.0	27.50	£1,000pm; 0% on up to £5,000 for a year, then 15.6%
Nationwide BS FlexAccount	7.75	24.90
Halifax Moneyback	7.90	28.80	£1,000pm; No interest or fees on authorised overdrafts up to £2,500 for 120 days (trans- ferred accounts only)
Yorkshire Bank Current Account Plus	8.29	31.37	-
Norwich & Peterborough BS Gold Current	8.80	24.90	£500pm; Authorised overdraft at 0% for 6 months for trans- ferred accounts

More about overdrafts:Ripped Off While In The Red!

So, why put up with credit interest of a pathetic 0.1% a year before tax, or overdraft rates ranging from 15% to 32% a year, when you can do so much better with a Best Buy bank account? If you apply today, you could be earning far more, or paying much less, interest within a couple of weeks!

More: Use the Fool to compare bank accounts, compare credit cards and compare savings accounts