Current accounts – long-term relationships won with short term deals.
Esther James, personal finance expert at Moneyfacts.co.uk – the leading independent financial comparison site, comments:
“Choosing to switch current accounts is not a decision many of us take lightly, as even with the best switching service it takes time and effort. With the transfers of direct debit, salary and other payment instructions to be taken care of, it’s usually takes at least a few weeks before your new account will be fully operational.
“Over the last 18 months, the current account market has changed shape. The range of packaged accounts has grown rapidly, and the continual rate battle has stepped up a gear every few months, with rates climbing and new players joining.
“With any competitive rate come terms and conditions, and the current account market is not without exception. Typically the highest priced deals require a minimum funding, will only pay the inflated rate for a limited time and to a limited value.
“The table below shows the returns over one and three years, based on an average credit balance of £1K.
Provider |
Account name |
Gross rate |
AER |
Period of initial rate |
Revert rate (AER) |
Minimum |
Maximum balance at higher rate |
Interest in year 1 |
Interest over 3 years |
Abbey |
Current (credit option) |
7.72% |
8% |
1 year |
2.50% |
£1,000 |
£1,000 (new accounts / £2.5K switchers) |
£80 |
£130 |
Alliance and Leicester |
Premier Direct Current |
6.31% |
6.50% |
To 31.1.09 |
1% below BBR |
£500 |
£2,500 |
£65 |
£160 |
Coventry BS |
First |
6.17% |
6.35% |
1 year |
5.50% |
£1,000 |
£250,000 |
£63.50 |
£173.50 |
Lloyds TSB |
Classic Plus |
6.22% |
6.40% |
1 year |
4.25% |
£1,000 |
£2,500 |
£64 |
£149 |
Halifax |
High Interest Current A/C |
6.00% |
6.17% |
- |
N/A |
£1,000 |
£2,500 |
£61.70 |
£185.10 |
Norwich and Peterborough BS |
Gold Current |
4.75% |
4.85% |
- |
N/A |
£1,500 |
£5,000 |
£48.50 |
£145.50 |
Nationwide BS |
FlexAccount |
4.25% |
4.25% |
- |
N/A |
£1,000 |
£3,000 |
£42.50 |
£127.50 |
Moneyfacts.co.uk |
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*figures do not allow for cumulative interest over the three years
“If you are looking for the healthiest return in year one, Abbey offers the best deal by far. But should you be looking to maintain this relationship beyond the initial term, Halifax wins hands down over a three year period. For those looking to sustain balances greater than £2.5K in their current account, the First Account from Coventry offers a great solution, paying its high interest rate on balances up to £250K.
“You tend to stick with your current account provider for a number of years, so don’t be lulled in by short term deals without knowing the full terms and conditions. Look for switcher incentives such as an initial 0% overdraft rate to counter any timing discrepancies between the transfer of your credits and debits. But all this said, any of these deals beat the 55% of accounts that pay 0.10% or below.
“Keep your eyes open when shopping for your new current account. Some of the deals are almost unbelievable in the short term, offering rates far in excess of any found on a savings account. But remember it’s not always about having the best return on your current account but how you will operate the account too.”
About The Moneyfacts Group
Moneyfacts is recognised as the UK’s leading provider of independent personal finance information. For the last 20 years, Moneyfacts’ information has been the key driver behind many personal finance decisions, from the Treasury to the high street.
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