Best bank accounts: Top current accounts for interest and rewards

Our bank account is the financial product that we use more frequently than any other, but many people rarely make sure theirs works for them.

Yet, different current accounts suit different people, with options ranging from those that pay interest, to ones that offer cheaper spending abroad, have good apps and budgeting tools, a better overdraft rate or package in extras, such as insurance.

Current account perks for signing up are also on offer as banks have started competing for customers again in recent months, with some even bringing back switching bonuses of as much as £150. 

Some banks are beginning to increase their interest rates too, albeit from a very low base – but choose one of our top picks, Virgin Money pays 1.71 per cent on balances up to £25,000 whilst Chase Bank pays 1.5 per cent on balances up to £250,000.

If you’re unhappy with your current bank or spot a better deal elsewhere, it may well be worth considering a switch. You can find our picks of the best accounts below.   

1. Best account for in-credit interest: Nationwide

Current account in-credit interest has dwindled in recent years, with many banking providers offering little to no interest to customers.

However, Nationwide has now increased the introductory credit interest rate on its FlexDirect current account to a market-leading 5 per cent.

The special rate will be available for new applications opened from today on balances up to £1,500 for the first 12 months.

It means someone keeping at least £1,500 in the account could earn £75 in interest over the course of one year.

It’s also worth noting that it pays £125 to existing members who switch their current account, while completely new customers will receive £100 for switching.

For switchers to be deemed a member and qualify for the more generous switching bribe, they will need to either hold a savings account or residential mortgage with Nationwide.

The cash bribe and interest combine to mean that someone switching to the FlexDirect account could earn between £175 and £200 across a 12 month period.

Watch out

Unfortunately, anyone who has previously held a FlexDirect account will not be eligible for the new rate.

However, if applicants have previously held a sole account only, they would be eligible for the introductory rate on a joint account and vice versa.

To qualify, switches must be made from another provider using the Current Account Switching Service (CASS) and a minimum of two active Direct Debits must be transferred as part of the switch and set up on the new account. CASS will do this automatically for you.

To benefit from the in-credit interest, holders must pay in a minimum of £1,000 each month.

On the last day of every month Nationwide will calculate the interest earned each day and then pay this interest on the first day of the next month.

However, if the monthly income being deposited into the account drops below £1,000, you won’t receive any interest that month.

The 5 per cent rate ends after one year. Thereafter it drops to just 0.25 per cent. So it may be worth looking elsewhere after the 12 months for a better return on your money.

Verdict

The interest rate and cash bonus is not the only reason for switching a current account.

Online and mobile banking offerings and better customer service are often cited as the main reasons behind people switching current accounts.

Overdraft limits, cashback and other niche lifestyle benefits are all factors that count for something as well. 

Ultimately, however, if cold hard cash is all you’re after, Nationwide’s current account switching perks are some of the best on offer.

However, you may just find yourself needing to switch again in a year when that in-credit interest plummets to 0.25 per cent.

2. Best account for interest on a large balance: Chase

For those with large amounts of savings, linked savings accounts currently offer the best easy-access savings deals on the market.   

Chase, is the stand out example. The savings account, linked to the Chase current account – which is app-only – offers savers a rate of 1.5 per cent.

Savers can deposit up to £250,000 (although, only £85,000 is protected by the Financial Services Compensation Scheme) in total at any time and can access their savings as often as they like, with no fees, charges or loss of interest.

Someone depositing the maximum £85,000 protected by the FSCS into the Chase linked savings accounts could expect to earn £1,284 in interest after the first year, were the rate to remain the same. 

Chase’s deal is actually bettered by another linked savings account offered by Virgin Money. 

Although Virgin’s linked savings accounts pays 1.56 per cent, it does so, only on balances up to £25,000, and then only 0.75 per cent an anything above that level. 

However, someone depositing £25,000 in Virgin’s account could expect to earn  £393 in interest after one year.

Chase’s current account comes with some good features, namely its 1 per cent cashback on spending for the first 12 months, although there are some exceptions.

It offers a fee-free debit card abroad so you won’t be charged any fees by Chase when using their card when traveling, including for cash withdrawals at ATMs.

Watch out

There is no minimum income requirement to open the Chase current account, however you’ll need a relatively new smartphone to run the account.

Your smartphone will need to run iOS 14 and above, or have access to Google Play on Android 8.1 and above, which means some devices are not supported due to hardware limitations. 

There is no minimum income requirement to open the Chase current account, however you’ll need a relatively new smartphone to run the account.

Your smartphone will need to run iOS 14 and above, or have access to Google Play on Android 8.1 and above, which means some devices are not supported due to hardware limitations. 

The bank also doesn’t currently offer joint accounts, so it won’t necessarily work for everyone. 

Recent changes to its overdrafts mean customers will now pay a flat rate of 39.9 per cent interest when overdrawn, this will be costly for those who regularly stray into the red. 

Our verdict

Accounts that are good for both in-credit and overdrawn customers are few and far between, so this could be a great bet for those looking to have an easy access savings account paying more than any competitor on the market.

3. Best account for cash signing up bribe: Halifax

Three-figure switching bonuses disappeared for much of 2020, but there are now a number of current accounts offering £100-plus for switching.

Halifax is offering a whopping £150 to anyone opening its current account. First Direct is also dangling a incentive of £150. However, Halifax’s account also comes with rewards and cashback that puts it just ahead in our opinion.   

To claim the £150 with Halifax, joiners need to switch their account held elsewhere into a new or existing Reward Current Account. 

They will need to use the Current Account Switch Service (CASS) to close their old account held elsewhere.

They’ll also need to switch at least two active direct debits as part of the switch. As long they are already in place, Halifax will arrange for these direct debits along with standing orders to be transferred automatically.

On top of the £150 bribe there are other perks to take advantage of. There is a choice of £5 a month paid into the account, two film rentals or three magazine rentals, or a free cinema ticket each month.

In order to benefit from this account holders must choose to either Spend £500 on their debit card each month or Keep at least £5000 in the account at all times. 

They must also pay in £1500 or more into your account each month and stay in credit – keeping your balance at £0 or above. 

Watch out

There is a £3 monthly fee for maintaining the account, but as long as £1,500 or more is paid into the account each month that fee will be waived.

The switch must be started before 5 September this year.

If someone has received cashback for switching to Halifax since April 2020 they won’t be eligible for the £150.

Our verdict 

Halifax’s £150 welcome bonus is the joint most generous on offer.

The switching requirement to set up two direct debits or standing orders is a simple enough hurdle to jump over. 

Plus, as long as £1,500 is paid into the account each month, there is no monthly or annual fee that comes with holding the account.

For anyone choosing a bank account based on a pure cash freebie, this is a no brainer. 

4. Best account for cashback: Santander 

For those looking for a bank with a decent cashback offering Santander may be your best bet.

It is also the only current account provider to offer cashback on bills, which given the rising energy bills, makes this an extra noteworthy deal. 

Its customers can earn 2 per cent cashback on their gas and electricity bills up to a cap of £5 each month as well 3 per cent cashback on water bills with an additional cap of £5 each month in place.

The average annual cost of a water bill is £408, according to Water UK meaning the £5 monthly cashback cap is unlikely to be reached.

Given the average bill, a typical Santander customer could expect to get about £12 cashback on their water bills.

When it comes to heating, those coming off fixed deals onto new ones have found their estimated bills are increasing by hundreds of pounds with many reporting their annual bill is expected to reach over £2,000 – a massive jump.

Analysts at Cornwall Insight predict that from October the average energy bill will be as high as £2,900 a year. 

For someone facing an annual gas and electricity bill of £2,900 a year, 2 per cent cashback could end up being worth £58.

For those paying their council tax, mobile and home phone bills, broadband and TV packages though one of these two current accounts they can also earn 1 per cent cashback up to a maximum of £5 each month.

The average Band D council tax set by local authorities in England for 2021-22 will be £1,898, according to government figures.

Even 1 per cent cashback on the average council tax bill could therefore be worth £19 after one year. 

It also worth mentioning that Santander 123 customers can get monthly interest of 0.75 per cent on balances up to £20,000.

Watch out

Santander’s 1I2I3 and 1I2I3 Lite account come with a £4 and £2 monthly charge respectively.

This means an average Santander’s 1I2I3 and 1I2I3 Lite account holder could expect to earn an additional £23 or £43 of cashback (based on the bill estimates above) after the account charges have been included.

But also worth noting that given that a Santander mortgage product will also be eligible for 1 per cent cash back and a Santander home insurance product could be eligible for 2 per cent, it may be possible for some to earn much more.

To qualify, you need to set up and maintain two direct debits and also deposit at least £500 into the account each month.    

Our verdict

When it comes to cashback Santander appears to be ahead of its competition. 

Although it disappointingly removed its £140 cashback offer to new and existing customers who switch to one of its accounts, it’s still a good deal and could provide some small respite in tackling escalating living costs.

Winner of ‘best British bank’ at the British Bank Awards four years in a row and gaining the highest number of net accounts through the switching service since the start of 2020, digital challenger bank Starling is increasingly a force to be reckoned with. 

Originally a smartphone-only bank with an offering aimed largely at holidaymakers, the challenger, launched in 2016, has increasingly grown into a legitimate, even potentially profitable, challenger to Britain’s biggest banks.

Its current account can be downloaded through a smartphone app and can now also be managed online, and pays 0.05 per cent interest on up to £85,000. 

It offers instant spending notifications, compartmentalises spending into categories and lets accountholders create dedicated ‘spaces’ for their savings. 

Plus, it allows customers to use their card overseas with no fees and make unlimited ATM withdrawals, again, without fees.

Watch out

Starling doesn’t have any branches, which might cause an issue for some customers who want face-to-face banking, but customers can pay in cheques at 11,500 Post Office branches or using the app.

Like other banks, it also charges a potentially steep overdraft rate of up to 35 per cent on overdrafts, depending on customers’ credit scores, although this can be as low as 15 per cent.

Our verdict

Starling has gained close to 88,000 switchers more than it has lost since the pandemic began without offering customers any sweeteners suggesting it must be doing something right.

The bank’s interface and the way in which it categorises transactions has been praised by customers and awards judges alike as intuitive and easy to use.

Some Britons may not be ready to fully embrace digital banking, but with fee-free overseas spending and ATM withdrawals, perhaps they should consider trying it for their holiday spending, if and when holidays are once again allowed, and go from there.