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.
| Account | Perks | Conditions | Overdraft |
|---|---|---|---|
| First Direct 1st Account | £150 switching bonus £250 interest-free overdraft Earn 3.5 per cent via Regular Saver Account |
Deposit £1,000 within 3 months of the account opening. | Above £250 it is charged at 39.9 per cent |
| Chase | 1% cashback on everyday. purchases for a whole year. Fee free when using card abroad Access to linked easy-access savings account paying 1.5% on balances up to £250,000. 5% round ups option for spare change |
None specific. You have to use the app. |
39.9 per cent |
| Nationwide FlexDirect | £100 switching incentive. If you are a Nationwide member, you’ll get £125 for switching. 5 per cent interest up to £1,500 and fee-free overdraft, both for the first year only. After the first 12 months, it’s 0.25 per cent. Interest-free arranged overdraft for 12 months |
Pay in £1,000 a month. | After the first 12 months it is 39.9 per cent |
| Halifax Reward | £150 cash offer when you switch The choice of £5 a month paid into your account, two film rentals or three magazine rentals, or a free cinema ticket each month. |
Switch using current account switching service and set up two direct debits or standing orders. No monthly fee if you pay in more than £1,500 each month otherwise a £3 monthly fee to maintain the account applies. |
39.9 per cent |
| Club Lloyds | Pays 0.6 per cent on up to £4,000, and 1.5 per cent on £4,000 – £5,000. Choose a reward each year from 6 cinema tickets, an annual magazine subscription, 12 digital movie rentals. £50 interest free overdraft |
You’ll need to switch and close your account held elsewhere into a Club Lloyds Account using the Current Account Switch Service. Also there is £3 monthly fee unless you deposit £1,500 a month. |
After first £50 its 27.5 per cent. |
| Santander 123 | Santander will pay up to 3 per cent cashback on bills. Capped at £5 each month across three categories. Pays 0.75 per cent on balances up to £20,000. |
£4 a month fee. You must pay in £500 a month and maintain two active direct debits. | 39.94 per cent. |
| NatWest Reward & RBS Reward account | £5 a month back in rewards and 1 per cent back from certain partner retailers. | £2 monthly fee. Must set up two direct debits a month for £4 bonus, and then log into mobile banking once a month for £1 bonus. | 39.49 per cent |
| Starling Bank current account | 0.05 per cent interest on balances. Fee-free spending and ATM withdrawals abroad. | Online and smartphone-only bank. | 15, 25 or 35 per cent depending on credit score. |
| Virgin Money M Plus Account | Earn 20,000 Virgin Points when you switch. Account pays 2.02 per cent monthly interest on up to £1,000 and comes with a linked easy-access account paying 1.56 per cent on up to £25,000. |
Apply online, switch through CASS with two direct debits and pay in £1,000 to a linked easy-access account. | 19.9, 29.9 or 39.9 per cent based on credit score. |
| Triodos Bank | Low overdraft rate of 18 per cent. Promises only to lend on projects that make a ‘positive impact’ for people and the planet. |
£3 monthly fee. | 18 per cent. |
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.
The current account king: Nationwide has attracted more than 661,000 more customers than it has lost via the switching service
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.
Nationwide also pays £125 to existing members who switch their current account, while completely new customers will receive £100 for switching.
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.
Account management: Chase customers can open sub-accounts with its own sort-code and account number – and can then pick which account the debit card is linked to at any moment
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.
Numberless: The Chase debit card doesn’t have a number. This means a smaller risk if the physical card is lost and a new card number can be generated straightaway, meaning a customer can continue to use the card digitally.
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.
Teaser: Halifax is offering £150 to new joiners.
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.
Santander is offering between 1-3% cashback on bills to its current account customers
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.
Santander is the only bank to offer customers ongoing cashback on household bills.
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.
Starling: The multiple award-winning smartphone challenger bank
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.
Starling Bank has consistently secured net customer gains via the current account switching service despite not offering cash incentives.
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.
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