Switch to a cracking current account today!

Whether you're after the highest interest rate or you regularly use your overdraft, here's the lowdown on the best current accounts in town..

This article was first sent to readers as an afternoon email.

If I asked you what the interest rate was on your current account, would you know? How about the overdraft rate? Any ideas?

If you're anything like me, you probably regard your current account as something to be used and abused -- in other words, it's simply the place where your salary is paid, only to be rapidly zapped back out again.

As a result, you might not be terribly aware of all the ins and outs of your account.

Yet in today's climate, these ins and outs are worth investigating, because in fact, a current account can be far more than somewhere to stuff your salary...

Fabulous interest rates

It might sound bizarre, but a current account can be a great place to save. In fact, with many savings accounts now paying next to nothing in terms of interest, it's easily possible to find a higher paying current account!

To prove I'm not talking rubbish, let's take a look at some of the best current accounts available in terms of interest rates:

Current Account and Provider	In Credit Rate (AER)	Overdraft Interest Rate (EAR)	Minimum Funding Requirements
Alliance & Leicester Premier Direct Current Account	5% on balances up to £2,500 for 12 months, 1% thereafter. 0.1% on balances above £2,500	0%	£500 per month
Abbey Preferred In Credit Bank Account	5% on balances up to £2,500 for 12 months, 1% thereafter. 1% on balances above £2,500	19.9%	£1,000 per month
Lloyds TSB Classic Plus	2.5% on balances up to £2,500, 0.1% thereafter	18.9%	£1,000 per month
Coventry BS Coventry First Current Account	1.6% (includes 0.85% bonus for one year) on balances up to £250,000*	£250 interest free overdraft.	£1,000 per month

*This is the maximum balance permitted for this account.

As you can see, the Alliance & Leicester and Abbey accounts knock the socks off the competition in terms of the interest rate they pay. What's more, if you were looking for a savings account to beat that, I think you'd struggle!

So depending on how much money you keep in your current account, and when you pay your bills, these two accounts could prove a nice little earner for your cash.

On the downside, you'll need to bear in mind that this rate of 5% is only valid for one year -- at which point the rate drops to a meagre 1% (for both accounts). So once the 12 months is up, you'll need to get switching again.

You might also have noticed that three out of the four accounts in the chart slash the interest paid pretty severely if you have a balance of more than £2,500. On the other hand, the Coventry First Current Account allows you to have a balance of up to £250,000. But let's face it, its rate of 1.6% (which includes a bonus) is pretty pathetic in comparison.

So that's where the Lloyds TSB Classic Current Account with Vantage deserves a mention. Unlike the accounts mentioned above, it rewards you for having more money in your account, not less. So if you're lucky enough to have a balance of between £5,000 and £7,000 you can pick up a handsome interest rate of 4% AER.

Alternatively, you'll get a slightly lower rate of 3% if you have between £3,000 and £5,000, or 2% if you have between £1,000 and £3,000.

Slipping into the red

While money remains tight for many of us, managing to make your finances last until payday can be a tad tricky. As a result, you may find yourself regularly dipping into the red. But that doesn't mean you can be excused from hunting out a better current account. Far from it! After all, why pay a ridiculously high overdraft rate when you could be paying a lot less?

So let's take a look at four of the best current accounts in terms of overdraft rates:

Current Account and Provider	Overdraft buffer	Overdraft Interest Rate (EAR)	In-credit Rate (AER)	Minimum Funding Requirements
Alliance & Leicester Premier Direct Current Account	No	0% for 12 months on overdrafts up to £2,000	5%	£500 per month
Abbey Preferred Overdraft Bank Account	No	0% for 12 months on agreed overdrafts	0.1%	£1,000 per month
Norwich and Peterborough Gold Current Account	No	0% for six months, 9.74% thereafter	0%	£500 per month for first six months. You need to pay in £1,500 thereafter if you wish to qualify for the overdraft rate of 9.74%
Cahoot Current Account	Yes -- £100	11.8%	1.1%	n/a

*Based on a typical customer who requests an overdraft limit of £1,000

Once again, Alliance and Leicester and Abbey top the charts, offering a fabulous 0% for 12 months.

However, the drawback to the Abbey account is that once the 12 month period expires, you'll be hit with a fairly hefty 12.9% EAR. So you'll need to stay on the ball and hunt around for a better deal to switch to once the 0% period expires. You'll also only get a measly in-credit rate of 0.1% AER if you manage to pay your overdraft off.

On the other hand, the Alliance & Leicester account will charge you a usage fee of 50p a day (up to £5 a month) once the 12 month 0% period has expired. (However, you may still be able to get a better deal if you shop around.) And if you pay off your overdraft in full within the first year, you'll receive a tasty 5% AER on credit balances. Not bad!

So what are you waiting for? Ditch that rubbish current account and switch to a fabulous new one today!

Compare a range of current accounts here.

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