With savings rates at an all-time low, lots of people are turning to high interest rate current accounts. But with so many options, how do you find which one suits you best? And what do you really need to consider when comparing high interest current accounts? Let’s take a look.
How to find an account
The best places to look for high interest accounts are comparison websites. These will provide you with a selection of the best accounts currently on the market. Alternatively, national newspapers carry best buy tables in their weekend supplements. It is always worth taking a look at these as well.
What should you look at?
Minimum pay-in requirements
One thing to look at when comparing high interest current accounts is whether the account has a minimum pay-in requirement. For example, you may have to commit to paying in £1,000 a month in order to qualify for the account.
It’s a good idea to ask yourself whether this is something you will be likely to be able to do. For example, if you plan to have your salary paid regularly into this account, is your monthly income equal to the amount specified?
Direct debits and standing orders
Many high interest current accounts specify a minimum number of direct debits or standing orders to be set up for the account in order to qualify for the headline rate. It’s worth considering what you plan to use the account for and whether you will need these automated payments.
Much like with credit cards, in order to achieve a high interest rate or more benefits a current account may be subject to monthly fees. This may only be a few pounds a month, but it could be wise to work out whether what you will earn through the high interest rate will offset the monthly fee.
Some bank accounts have an upper limit on the balance they pay interest on. For example, they may only pay interest on balances up to £2,000. If you have an account like this with a balance of £3,000, you will only earn interest on the first £2,000.
Introductory rate of interest
One other element to keep in mind when you are comparing high interest current accounts is whether the rate of interest advertised has a limited shelf life. For example, you may find an account that offers 3% interest on your balance, but after the first year, this will drop to just 0.5%.
If you are happy to continue switching accounts when the limited time offers end, this may not be a problem.
Interest rates or cash incentives?
While the likelihood is that you are searching for a current account that offers a high rate of interest, if you can’t find one that suits you, then maybe consider an account that offers a switching incentive.
Lots of providers include a cash incentive as part of the deal when you switch your bank account to them. This can be anything from £100 to £200.
How easy is it to switch?
Once you have found the current account you want, you may be concerned about the process of switching your account. Since the introduction of the Current Account Switching Service (CASS) in 2013, moving your current account has never been easier. With CASS you can switch your account in just seven days.
All you need to do is apply for your new current account and complete a current account switch agreement, plus a current account closure instruction for your old account. You can then choose the date when you want your account to switch over.
Your new bank will confirm your switch-over date and complete the switching process. This includes informing your employer of the new account number so your wage can be sent there, as well as moving any direct debits or standing orders. You will be informed once the switch has been completed.
Any payments made to your old account will be automatically moved to your new account for 36 months, meaning that nothing should slip through the cracks.
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