7th March 2016
Savers squirreling money into a top paying current account could earn more than three times as much as those using the leading easy access savings account or instant access ISA according to new research.
MoneySuperMarket.com compared interest rates for current accounts and savings accounts to assess where consumers would be better off putting their money.
Right now both Nationwide and TSB offer current accounts with in-credit interest rates of 5%, whereas the leading easy access account from RCI Bank pays just 1.55%.
Nationwide’s FlexDirect account currently offers 5% on balances up to £2,500, while TSB’s Classic Plus Account also offers the same rate on balances up to £2,000. In addition, Santander’s 123 account pays 3% on balances between £3,000 and £20,000, making it a good option for anyone with a larger savings pot.
Those hoping for a better return with an ISA look set to be disappointed too.
The best paying instant access ISA from the Post Office offers just 1.45%, again more than three times less than the top paying current accounts.
Fixed term ISA rates fare slightly higher, though still do not equal those of the leading current accounts. Aldermore pays 1.5% on its one year fixed, the State Bank of India’s three year fixed comes with 2.3% and First Save offers 3.06% in interest on its five-year fixed deal. Those saving with a Help to Buy ISA will find the best deal through Halifax, which pays 4%.
Although interest rates may not be as high as some current accounts, ISAs do pay out on a much higher balance than most current accounts. The maximum ISA annual allowance is £15,420, meaning savers can earn interest on this entire sum, which could work out more favourable for those with a bigger savings pot. There’s still time for anyone who has not taken advantage of this year’s ISA allowance to do so before the end of the tax year on 5 April.
Kevin Mountford, banking expert at MoneySuperMarket, said: “Banks have upped their current account interest rates in recent years in order to create more competition within the market and attract customers. It’ll be interesting to see how the new personal savings allowance, being introduced in April, will prompt people to reconsider their savings habits. In the meantime if you’re a saver looking for better rates then you should maximise your interest, whether in a traditional savings account, ISA or current account.
“Mixing and matching between top paying accounts will ensure your money works harder for you. However, be aware of any terms and conditions or stipulations on the accounts that could affect the rate of return you get. Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount or cap the balance for which interest is paid, while some market leading savings deals have restrictions, so it is important know what those may be before you make the switch.”