Which bank should I switch to?


In this climate of ultra low savings rates, current accounts now pay more than many traditional deposit accounts.

Savers are increasingly turning their back on cash Isas and fixed-rate bonds, opting for current accounts that pay up to 5pc instead.

Furthermore, arrival last year of the new personal savings allowance means that current accounts are even more attractive.

Since April 6 2016, the first £1,000 of interest earned by basic-rate taxpayers on their savings, and the first £500 earned by higher-rate taxpayers, is no longer touched by the taxman.

Good for savers with small balances

*Nationwide FlexDirect Account

Nationwide’s FlexDirect current account pays a rate of 5pc on balances up to £2,500 for the first 12 months. After the initial 12 months, the account reverts to a 1pc rate, so make sure to switch when the introductory offer ends.

Customers have to pay in at least £1,000 every month to qualify for the interest. Similarly to TSB, no direct debits are required.

The account (along with other Nationwide Flex current accounts) qualifies customers to open a Nationwide Flexclusive regular saver, which pays 5pc and lets savers pay in up to £500 per month.

Pros: Great 5pc rate and a high allowance on the linked regular saver. No direct debits required

Cons: Large £1,000 monthly minimum pay in and 5pc rate ends after 12 months

How much could I earn in a year? Up to £125

Tesco Bank current account

As savings rates tumble Tesco has promised to guarantee the 3pc rate of its current account until April 2019. However this is only paid on balances up to £3,000.

Tesco has also recently changed the criteria of the account. Before April this year savers were not required to make minimum monthly payments or set up direct debits.

However, new customers must now credit the account with £750 a month and set up three monthly direct debits.

Tesco Bank customers also earn one Clubcard point per £1 spent at Tesco on their debit card until April 2019. This is in addition to collecting one point per £4 spent in Tesco on the card and one point per £8 in other stores.

Pros: Decent rate that is guaranteed until 2019. Clubcard points may be attractive if you shop in Tesco

Cons: New rules make the account more restrictive than before

How much could I earn in a year? Up to £90

Some accounts pay up to 5pc interest and others offer generous switching incentivesCREDIT: PA
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Good for cashback

*Santander 123 Current Account

The Santander 123 current account offers cashback on household bills paid by direct debt. Customers can earn between 1pc and 3pc on water and council tax, energy bills and broadband packages. In addition, Santander mortgage customers receive 1pc cashback on repayments up to £1,000 a month.

Santander says the average customer earns £9 a month in cashback.

The account also pays in-credit interest of 1.5pc for those with up to £20,000 in their account.

The downside is a monthly £5 fee, which would slightly erode the interest. But those who maximise the cashback could wipe out the fee.

Customers need to pay in £500 a month and have at least two direct debits set up. The account must also remain in credit.

Pros: Interest of 1.5pc offered on large balances. The cashback could also prove to be generous if you pay your bills out of the account

Cons: £5 monthly fee

How much could I earn in a year? Up to £240 plus cashback

*TSB’s Classic Plus Account

TSB’s Classic Plus account is perfect for those who want to earn decent interest plus cashback on smaller deposits.

The account pays 3pc on balances up to £1,500. Customers can also earn £5 a month cashback if they set up two direct debits and another £5 for making 20 debit card transactions a month.

This offer ends June 30 2018 and is only available to savers who apply for the account after March 1 2017.

Customers must pay in at least £500 every month and sign up for online banking, paperless statements and paperless correspondence.

Pro: Decent cashback boost. Low required monthly pay in

Con: Small maximum balance that earns 3pc

How much could I earn in a year? Up to £45 plus £120 cashback

Good for customer service

*First Direct 1st Account

First Direct consistently tops polls for customer service, and has for some years.

It has great smartphone apps and a 24-hour call centre, where calls are answered by a human, not a machine.

Most transactions have to take place online, on the phone or on a mobile – First Direct does not have its own branch network, although customers can pay in cheques or make withdrawals in HSBC branches.

First Direct’s 1st Account does not pay any interest but it does offer £125 to new customers who switch using the Current Account Switching Service. The account also comes with a £250 interest-free overdraft facility.

On the downside, customers must credit the account with £1,000 a month or maintain this as their balance or they must pay a monthly fee of £10.

1st Account customers can also open a First Direct regular saver account, which pays 5pc on monthly payments of £25 and £300. The rate is offered for 12 months. See here for more on regular savers.

Pro: Good customer service record and £125 switching reward

Con: No in-credit interest and potential £10 monthly fee

How much could I earn in a year? £125 for the switch

Good for perks

M&S Current Account

M&S Bank’s current account comes with a £125 M&S gift card when you switch. For every month customers pay in £1,000 and have two active direct debits, another £5 is added to the card.

The account also offers a £500 overdraft, with the first £100 interest-free.

Account holders will also earn one point for every £1 spent on their M&S debit card in M&S (in store and online). For every 100 points earned, customers receive £1 in M&S vouchers, which are sent to the account holder each quarter. Those with the current account also have access to M&S’s monthly saver which pays 5pc on monthly deposits up to £250.

Pro: M&S vouchers and points. Plus, access to the monthly saver that pays 5pc interest.

Con: No in-credit interest and the reward is in vouchers

How much could I earn in a year? Up to £185 M&S vouchers

Co-operative Bank Current Account

Customers who switch to Co-op Bank’s current account will receive £110 in cash as a welcome gift.

The account does not pay interest, instead customers can opt into the bank’s Everyday Reward scheme which offers up to £5.50 per month.

Account holders who remain in credit and pay in £800 per month are rewarded £4 each month. Customers must also log in to online banking once a month and opt for paperless statements to qualify. If all criteria is met, customers can earn 5p in cashback each time they use their debit card. This is capped at £1.50 per month.

Pro: £110 in cash plus a potential annual reward of £66

Con: Customers must meet all the criteria to get the bonus

How much could I earn in a year? Up to £176