High Interest Bank Accounts
What is a High Interest Bank account?
High interest bank accounts usually go unnoticed by most customers. With many current accounts paying as little as 0.01% interest on money in the account, most people don’t pay as much attention to the interest rate as they would with a savings account, but this can be a mistake.
High interest current accounts can pay a high rate of interest on the credit in the account, and earn their users extra money they wouldn’t gain from a standard current account, while retaining the same level of benefits.
What do you need to apply for one of these accounts?
The accounts usually don’t require any special entry requirements, but some may require you to pay a fixed amount into the account each month, which is usually between £1,000 and £1,500.
Benefits of these accounts
The benefits are pretty clear: if you have money in the account, you’ll earn money on it. So if you have an average of £2,000 in your account throughout the year, at 5% you’ll earn an extra £100 interest over the year.
Disadvantages of these accounts
Many of these accounts only offer interest on balances up to a certain level. Some people would be better off putting the extra money in a traditional savings account, where they will earn interest on all of their money.
These accounts are also unsuitabled for those who are often in overdraft and don’t keep their accounts in credit for long.
Alternatives to high interest bank accounts
Those who keep their accounts well in credit could keep the extra money in an ISA, where they will earn a higher rate of interest, on the full balance, up to £5,100 a year.