Six of the best high interest current accounts

golden piggy bank©

MAKING money on your bank balance through a high interest current account has never been easier.

The availability of high interest current accounts has and with pitifully low interest rates offered by other accounts, including the once lucrative tax-free ISAs, there's never been a better time to invest in one.

Here we list six of the best high interest current accounts, explain how they work and what restrictions may apply, including those relating to tax, multiple accounts and minimum requirements.

Which current accounts pay interest?

The following table provides a quick overview of six of the best high interest accounts currently available; it details how much interest they offer and importantly how that translates into potential earnings:


average credit balance


average credit balance


average credit balance


average credit balance
Halifax Reward current account
£3 monthly credit (£3.75 gross)**, conditions apply
(more details)
£45 'interest' a year
(£3.75 monthly*)
£45 'interest' a year
(£3.75 monthly*)
£45 'interest' a year
(£3.75 monthly*)
£45 'interest' a year
(£3.75 monthly*)
Club Lloyds current account
2% AER on balances up to £5,000
(more details)
£10 a year
(<£1 monthly*)
£20 a year
(<£1.50 monthly*)
£40 a year
(£3 monthly*)
£100 a year
(£8 monthly*)
Nationwide FlexDirect current account
5% AER on balances up to £2,500
(more details)
£25 a year
(£2 monthly*)
£50 a year
(£4 monthly*)
£100 a year
(£8 monthly*)
£125 a year
(£10 monthly*)
Santander 123 current account
1.5% AER on balances up to £20,000
(more details)
£7.50 interest a year
(<£1 monthly*)
£15 interest a year
(£1.25 monthly*)
£30 interest a year
(£2.50 monthly*)
£75 interest a year
(£6.25 monthly*)
Tesco Bank current account
3% AER on balances up to £3,000
(more details)
£15 interest a year
(£1 monthly*)
£30 interest a year
(£2.50 monthly*)
£45 interest a year
(£3.50 monthly*)
£90 interest a year
(£7.50 monthly*)
TSB Classic Plus current account
3% AER on balances up to £1,500
(more details)
£15 interest a year
(£1 monthly*)
£30 interest a year
(£2.50 monthly*)
£45 interest a year
(£3.50 monthly*)
£45 interest a year
(£3.50 monthly*)

* These monthly values are approximate.

The calculations above don't take account of any tax we may need to pay (see more on that here), and assume that all the conditions for triggering the interest payments are met (see the last section for those).

However, it's clear to see that earning potential is primarily affected by the average balance in the account and caps on how much of the balance can earn interest. So lets look at how these work in more detail.

Average balances and caps

Current accounts are designed to be used for our everyday financial needs, with money going in and out again in reasonably short order, so the banks could be forgiven for expecting there to be a kind of natural limit on the average balance.

But as is clear from the table above, some are more generous than others regarding how much they expect us to have in an "everyday" account: caps on interest-earning balances range from £1,500 up to £20,000.

From the above table it seems that those with a generally low balance in their current account seem to be better off with higher interest rates whilst people who can maintain a high average balance are better off opting for a slightly lower rate with a higher cap.

Another important point to remember with these accounts is that they generally calculate interest based on the balance at the end of every day. The "average" balance we've used above is just a guide.

This is particularly important for accounts with tiered rates, or thresholds for earning interest.

Say, for example, an account pays 2% AER on balances above £1,000 and 1% below that amount. Balances hovering around that limit will earn at one rate one day, and the other rate another day, depending on which side of the £1,000 they're hovering at the time.

This could really cut into earnings, despite the £1,000 "average balance" calculation above.

Our table calculations don't take account of any tax we may need to pay, so let's look at how this could impact things.

Paying tax on current account earnings

Thanks to one major change in the tax rules, most of us don't need to worry about being taxed on our current or savings accounts any more.

Since the start of April 2016, basic rate taxpayers (those earning between £11,501 and £45,000) no longer have to pay tax on the first £1,000 of interest earned across their accounts.

Higher rate taxpayers (those earning between £45,001 and £150,000) will be able to earn up to £500 in interest before having to pay tax.

Should we earn more in interest than our Personal Savings Allowance (explained in full here), then basic rate earners will need to pay 20%, and higher rate earners 40%, on the extra.

More accounts, more interest: rules on multiple accounts

As we saw above, caps on the part of the balance that can earn interest can really restrict how rewarding our account can be, especially on those with the highest interest rates.

One way around that would be to open a number of accounts - but the banks are a step ahead of anyone thinking of trying that, with restrictions on how many accounts one person can hold at any one time.

In the past these have varied from provider to provider - Lloyds once offered customers the chance to have up to three Club Lloyds accounts, each paying the same rates.

Nationwide still allow customers to open up to four FlexDirect accounts - but unless one of them is held jointly, only one will get the 5% AER rate.

This is the standard: a maximum of two accounts, one of which must be a joint account.

Even so, 5% AER on two Nationwide accounts, each with the maximum £2,500 balance, isn't to be sniffed at.

Minimum requirements

As with some of the other top current accounts - including those that offer bonuses of £100 and more for switching to them - customers should expect to have to meet minimum requirements to get their rewards.

So let's go through what those requirements are, account by account.

Note that we focus on the terms and conditions purely as they relate to earning interest.

For more application criteria and other information - for example on overdrafts - please click through to the provider.


  • £3 reward each month: pay in £750, have at least two direct debits and stay in credit
  • £75 cashback when you switch to Halifax
  • £50 overdraft buffer (subject to status)

The Halifax Reward current account requires account holders to pay in at least £750 a month, and pay at least two direct debits out of the account each month.

Then they must also stay in credit.

If a customer goes overdrawn, they'll lose that month's £3 reward - and incur a daily fee of at least £1, depending how much over the £50 buffer they go.

Lloyds Bank

  • No monthly account fee if you pay in £1,500 per month, otherwise it costs £3 per month
  • Earn 2% AER variable credit interest on balances between £1 - £5,000
  • Exclusive access to banking offers

The Club Lloyds current account has recently ditched its tiered interest rates in favour of a flat 2% AER payable on balances up to £5,000.

The account is free to those who pay in at least £1,500 a month, otherwise there's a monthly fee of £3.

Interest is only paid to customers who pay at least two direct debits a month out of the account; going overdrawn won't affect whether or not interest is earned that month.


  • 5.00% AER in-credit interest on balances up to £2,500 (fixed for the first 12 months)
  • No arranged overdraft fees for the first 12 months
  • No monthly fee

The downside of the Nationwide FlexDirect current account is that the 5% is only available for the first year the account is open.

After that, the interest rate drops to 1% AER (variable).

Interest is paid on the first £2,500 of the account balance each month; no interest is paid on any part of the balance over £2,500.

It also has one of the higher thresholds for sparking interest: account holders must pay in at least £1,000 a month, and funding the account by moving money from another Nationwide account is not permitted.


  • 1% cashback on water, council tax and Santander mortgage payments (£1,000 max mortgage payment)
  • 2% cashback on gas and electricity bills
  • 3% cashback on mobile, home phone, broadband and paid for TV packages

The Santander 123 current account was once the top earning current account it was possible to get, thanks to a combination of up to 3% interest AER on balances of up to £20,000.

However, since November 2016 they've offered a flat rate of 1.5% on all in-credit balances, which is better for those with lower average balances, but about half as rewarding for those with more than £2,000.

Santander also pay cash back on direct debits for various household bills, including council tax and gas, electricity and mobile phone bills - so even if the balance isn't high enough to earn interest, the account can still pay.

To qualify for interest holders must pay in a monthly minimum of £500 and have at least two linked direct debits. There's also a monthly account fee of £5 - equivalent to £60 per year - which is worth taking into account.

Tesco Bank

  • Overdraft available subject to status
  • No monthly account fee
  • Use your debit card to collect Clubcard points

The Tesco Bank current account is a fairly new addition to the high interest club, seeming to buck the trend for shrinking returns.

It offers account holders 3% AER on balances up to £3,000, with a minimum monthly income of £750 and a requirement to set up three direct debits out of the account.

However, customers can benefit from Clubcard points for using their debit cards, wherever they spend.


  • 3% AER variable interest on balances up to £1,500
  • No monthly fees
  • Earn £5 cashback for having two direct debits per month, plus another £5 cashback if you spend with your debit card 20 times a month

The TSB Classic Plus current account is still one of the more eye-catching accounts, with a 3% AER rate.

Bear in mind, however, that interest is only paid on the first £1,500 in the account, based on the daily balance in the account.

Unlike other accounts offering interest this high, the rate doesn't disappear after an introductory period, so there's no future switching to worry about.

Thinking of switching?
For more information visit our full guide

Once a Plus account customer has registered for internet banking (and logs on at least once a year to check messages) they need only credit the account with £500 a month - less than most other interest-paying current accounts - and they don't have to set up any direct debits.


28 January 2017
Lizzie Dutton

<a href=";cuid=2412393" rel="nofollow noopener" title="">https://www.bankofscotland....</a>
3% on balances up to 5000

27 August 2017

Was tiered up to 5% but now flat 2% on &pound;5,000.
Saver is 2% on &pound;250/m 1yr &amp; a better return as tax free.
TSB is great value, +&pound;165/yr for &pound;1,500. Can't beat that anywhere.

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