Five cracking current accounts

Anger at the big banks' shabby customer service standards has hit the highest level of Government - and, no wonder, when more than half of all current accounts pay no interest on balances in credit. Don't stand for it - get a better deal with one of these five cracking current accounts

Consumers are rightly angry that the big banks - which were bailed-out by the taxpayer to the tune of £185bn - appear to be using those rescue funds to shore up their ailing balance sheets, rather than give consumers the deals they deserve. Research has shown that - in addition to higher-than-average mortgage rates - the banks we part-own are also offering shoddy deals on current accounts.

Figures from analysts Moneyfacts show that the majority of current accounts (81%) pay derisory rates of interest on balances in credit as low as 0.1% - and more than half of all accounts (52%) pay no credit interest whatsoever. Among the worst offenders are the standard accounts from Lloyds TSB, RBS and Northern Rock - all of which pay a taxed rate of just 0.1%.

No wonder then that Parliament’s ongoing ‘Future of Banking Commission’ saw the Government’s Financial Services Secretary Lord Myners call for increased competition in the banking sector, in the form of more differentiated products and new providers making their way into the banking sector.

Fortunately, you don’t have to wait for the Government to intervene to getter a better deal from your bank. And switching couldn’t be easier - your new bank will transfer all your regular payments and direct debits on your behalf following one simple phone call.

And by switching your account to one of the five best deals on the market, you could earn as much as 5% interest on your money - a rate far in excess of any best buy easy access savings accounts currently available - improved overdraft terms or a simple cash reward of £100. 

The best deals for balances in credit

The best rate you’ll get for an easy access savings account that guarantees access to your money at anytime is currently 3% from Halifax  - yet the latest best buy current accounts are paying rates as high as 5% AER on balances as high as £2,500. So you’ve got a small savings pot, it could make sense to switch.

Leading the way is the Alliance & Leicester Premier Direct current account. This deal pays a whopping 5% on balances in credit up to £2,500 for the first year of opening the account; after the first year, the rate paid falls to a better-than-average 1%.

Like many interest-paying current accounts, the A&L deal does require a minimum monthly deposit, but the £500 required is amongst the lowest on the market. What’s more, subject to credit status, you can also secure access to parent-group Santander’s Zero credit card, which offers 0% on balance transfers for six months and comes with no foreign exchange fees - a useful boon ahead of the holiday season.

You can also secure 5% interest on savings up to £2,500 with the Santander Preferred In-Credit account. Where this differs from the A&L deal is that the minimum deposit required is a steeper £1,000 but it does offer a maximum overdraft of £5,000 - useful should your circumstances change.

Be aware, however, that any balances above the £2,500 threshold on both these accounts pay out just 0.1% interest.

If you’re lucky enough to have a rainy-day fund in excess of £2,500, it could pay to look instead to the Lloyds TSB Classic with Vantage current account. Unlike the part-state-owned bank’s derisory standard offer, this account pays an impressive 4% interest on balances between £5,000 and £7,000. What’s more, that’s a permanent rate of interest rather than a one year bonus.

The requirement for the account is that you deposit £1,000 each month, which can be a salary payment.

The best deals for perks

Of course, in these straightened times, not everyone has access to a rainy-day fund - yet you can still get a better deal from your bank without a hefty lump sum to deposit. Some providers will even pay you to join them! The First Direct 1st account rewards customers with a £100 cash payment upon opening the account - and if you’re not happy with the account, the bank will pay in a further £100 into the account before closure.

The First Direct deal also boasts an interest-free overdraft of £250 and mobile banking text alerts - but it does require a minimum of £1,500 to be paid into the account each month.

Over the longer-term, it could be worth looking at the Halifax Reward Current Account. This account pays a guaranteed £5 a month each month you pay in £1,000 - whether you're in credit or overdrawn. That represents a worthwhile return without the requirement of a lump sum. Plus, if you open this account, you can also get the market-leading Halifax Web Saver Extra – it pays 0.2% more to Halifax current account customers.

• Watch our video: The cleverest current account around

Just bear in mind that the Halifax deal isn’t suitable for borrowers. The account charges a flat rate of £1 per day on overdrafts up to £2,500 - and if you’re permanently overdrawn, that adds up to a stinging interest charge of 365% APR. So make sure you stay in the black!

To get even more from your current account, sign up for our exclusive online banking service and take control of your money. Alternatively, you can make it your goal to reclaim your bank charges or find out how the banks lied to us.

Compare current accounts at lovemoney.com