Earn a higher rate on your savings

The savings market doesn't have much to offer savers right now, but find out how you can still earn a great rate on your cash with this easy two-step plan.

To earn a better rate on your savings, you’ll need to be a little more creative than usual when it comes to finding the best home for your cash.

So long as you don’t mind putting in a bit of extra effort, our easy two step plan will show you how to earn more on a chunk of your savings - and beat all the best buys at the same time. Here goes...

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Step One

You'll need to start off by opening a current account. With the Halifax Reward Current Account you don’t actually earn any interest on your balance. Instead you’ll be given a reward of £5 each and every month. All you have to do is pop in a minimum of £1,000 each month, and Halifax will give you a fiver for your trouble.

It doesn’t even matter if your account is in credit or overdrawn. Nor does it matter if you credit your account with the required £1,000 and immediately spend or transfer it elsewhere. After all, this is a current account.

For many of you, meeting the funding requirement would probably involve paying in your salary. If you like, you can use Halifax’s current account switching service, and use the Reward Account as a replacement for your existing bank. But you don’t have to run the account this way. You can fund the account in any way you choose, and there’s no need to pay in your salary if you prefer not to.  

In short as long as £1,000 hits your account at any point during the month, you’ll get a £5 bonus. Brilliant! So that means you’ll earn £60 over the next year if you stick to the rules, no questions asked.

Is £5 a decent reward?

Think about it this way: Let’s say you keep an average balance of £500 in your Halifax Reward Current Account by starting each month with a balance of £1,000, spending throughout and ending every month at zero. You would then earn £60 on a balance of £500. This is equivalent to a whopping rate of 15%. To look at the calculations in more detail, read Earn 15% interest on your savings!

Alternatively, you could put the £1,000 in, then immediately transfer it out again, back to your existing current account. Just keep doing this every month, and you'll earn that £5 a month without even having to move bank accounts, or keep any money in the account!

Bear in mind there’s no point in funding the account with more than £1,000 if you’re hoping to maximise your return, because you won’t be rewarded with any more than £5 each month.

Recent question on this topic

• LEvE asks:

  I’m looking for an easy way to turn a lot of loose change into ‘solid’ cash.

  • 
    SoftwareBear answered "some bank branches now have cash sorting machines ... the ones in the supermarkets cost quite a bit..."
  • 
    manzanilla answered "There is no way round the problem that you will have to move the money - what do you expect,..."
  • Read more answers

Step Two

If the cash you use to fund your Halifax Reward Current Account is spare - that is you don’t need to use it for your day to day expenditure - then you could earn an even bigger return above and beyond a fiver a month.

All you need to do is whip your £1,000 worth of savings out of the Reward Account at the earliest opportunity every month, and move it into an alternative savings account with a competitive interest rate.

You can do that quite easily by setting up a direct debit payment to your chosen savings account as soon as your £1,000 deposit has cleared.

But which savings account should you choose? Conveniently enough, a great candidate would be the Halifax Web Saver Extra.

Today, this account is one of the market-leaders with a rate of 2.80% on savings of £1 plus. But - and here’s the best bit - savers who also happen to have a Halifax current account (which you will have if you carry out Step One) enjoy an extra 0.20%, taking the return up to 3%. This is the market leading rate. But you should note the Halifax Web Saver Extra only allows one penalty-free withdrawal a year. Subsequent withdrawals will incur 30 days loss of interest.

So, if you move £1,000 out of your Halifax Reward Current Account and transfer it into your Halifax Web Saver Extra each month, you could earn a market-leading rate of 3% on your savings, on top of the £60 in cash you'll get from your current account.

Alternative Step Two

You could tweak Step Two to boost your rate even further if you already have a high interest current account as your main account. If you do, you can simply transfer £1,000 out of this account every month to the Halifax Reward Current Account, and then move it back again as soon as you can.

In this way, you can pick up £60 in rewards from Halifax and earn extra interest from your high interest current at the same time. The Alliance & Leicester Premier Direct Current Account would work well here. This account pays an even higher rate of 5% on the first £2,500 of your balance which is fixed for a year (the rate drops to 1% after year one, and balances over £2,500 earn 0.10%).

If you don’t already have a Premier Direct account, but you’re happy to switch to A&L now, you could go one better by applying for the Premier Regular Saver at the same time. Make sure, you leave a constant balance of £2,500 in your account to make the most of the Premier Direct 5% rate. Meanwhile, transfer your excess savings over £2,500 to the Premier Regular Saver, where you’ll earn a fantastic rate of 6% on monthly savings of between £10 and £250, fixed for a year.

Alternatively, if you have more than £2,500 in savings, you could go for the Classic with Vantage current account from Lloyds TSB. This pays 4% on balances between  £5,000 and £7,000. Again you must deposit £1,000 a month - but you don't need to keep it in there.

So you can see, to get the best possible rate on your savings all you need to do is open a couple of current accounts, and there you have it. Voila!

Compare savings accounts and current accounts at lovemoney.com

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More: Five way to increase your savings | Get the best rate on your savings – now!