Best current accounts: Top five bank accounts for switching with rewards

Switching is something many of us put off, with a third of customers sticking with the same old bank we opened our first account with, despite bad service, hefty fees and little reward for our loyalty.

But moving to a better deal could help get your finances back on track in 2020.

Switching is easy, meaning there is no excuse for staying put. You can find out our favourite accounts and how to switch hassle-fee below.

The coronavirus means not all banks are not in the business of trying to attract new customers with bumper switch bonuses, and many have cut their in-credit interest too.

But from the start of August banks began to bring back welcome bonuses, as the competition for current account customers looks to be resuming.

Find a more rewarding deal: Some accounts promise cashback, interest and freebies

Alternatively you can click through to read our in depth guides to the best banks according to how you use your account:

We have also compiled an easy to read table of the best accounts across the board.

TOP ACCOUNTS FOR FREE CASH, INTEREST AND PERKS
Account Perks Conditions
First Direct 1st Account  £100 cash to switch using the CASS. £250 interest-free overdraft
(Temporarily closed to new customers)
To earn the bonus you need to pay in £1,000 within 3 months. Pay in £1,000 a month or maintain a £1,000 balance or pay £10 per month.
Nationwide FlexDirect 2 per cent interest on up to £1,500 and fee-free overdraft, both for the first year only though. Pay in £1,000 a month.
Halifax Reward £100 to switch until 8 September. The choice of £5 a month paid into your account, two film rentals or three magazine rentals or a free cinema ticket each month. £3 monthly fee or pay in £1,500 a month. Spend £500 on your debit card each month or maintain a balance of £5,000.
Club Lloyds  Pays 1 per cent on up to £4,000, and 2 per cent on £4,000 – £5,000. This is changing in October. £3 monthly fee or deposit £1,500 a month, pay out two direct debits.
Metro Bank £50 for an existing customer and a friend if they open an account and switch, with existing customers able to earn up to £250 from referring five friends. Newcomers must be referred through a link, switch through CASS, pay in £500 a month for two months, make 10 debit card purchases and register for online banking.
TSB Classic Plus 1.5 per cent on up to £1,500 Pay in £500 a month. You must maintain two direct debits, register for internet banking, paperless statements and paperless correspondence.
Santander 123 Santander will pay 1 per cent on balances up to £20,000 plus up to 3 per cent cashback on bills. This is changing again on 3 August, read more below £5 a month fee. You must pay in £500 a month and maintain two active direct debits
Royal Bank of Scotland/NatWest Reward £100 to switch to RBS until 19 November.

£5 a month back in rewards and 1 per cent back from certain partner retailers.

Pay in £1,500 and log into online or mobile banking.

£2 monthly fee. Must set up two direct debits for £4 a month, and then log into mobile banking once a month for £1 each.

Starling Bank current account 0.05 per cent interest on balances Smartphone only app
Interest: Rates on specialist accounts beat most savings accounts

Interest: Rates on specialist accounts beat most savings accounts

Interest: Rates on specialist accounts beat most savings accounts

Best account for in-credit interest… Nationwide

There are a few banks offering in-credit interest. Some offers come without a time limit or interest on larger balances so which deal is best for you will depend on individual circumstances, but Nationwide is offering the highest available interest rate on a current account. 

Nationwide’s FlexDirect account pays out 2 per cent on balances up to £1,500 for the first year – not bad considering easy-access savings rates have slid in recent years.

You must pay in a minimum monthly income of £1,000. On the last day of every month Nationwide will calculate the interest you’ve earned each day and then pay you this interest on the first day of the next month.

Accountholders are also eligible for a 0 per cent overdraft for the first 12 months, after that you pay a whopping 39.9 per cent, so make sure you are back in the black before then.

Watch out

If your income drops and you can’t pay in £1,000, you won’t receive any interest that month.

The 2 per cent interest deal ends after a year, when 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.

You get an interest-free arranged overdraft for that 12 months, but after that overdraft fees are hefty.

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.

This is Money verdict

Accounts that are good for both in-credit and overdrawn customers are few and far between so this could be a good bet for those who have smaller balances – but can afford to pay in £1,000 each month, while the account still offers those benefits.

Those who switch to Halifax’s Reward or Ultimate Reward accounts can earn themselves £100

Best account for cash… Halifax 

Halifax has become the first bank in months to launch a cash switching bonus, and offers £100 to those who open either its Reward or Ultimate Reward current accounts.

There are no catches on the £100 offer, applicants who haven’t earned cashback from Halifax since April 2018 must simply switch through the Current Account Switch Service and they will receive the money upfront.

Halifax also pays customers £5 a month as a reward, although other options including digital magazine subscriptions or cinema tickets are also available.

Watch out

Halifax’s Reward account comes with several hurdles customers need to clear in order to earn that £5 a month cashback.

The account comes with a monthly fee of £3 unless customers pay in £1,500 a month, then to earn the £5 they must either spend £500 a month on their debit card, or keep £5,000 in their month for a full month.

Overdrafts are also at a standard rate of 39.9 per cent APR, while the cost of borrowing could potentially be as high as 49.9 per cent APR, the most expensive on the market.

This is Money verdict

Halifax’s switching offer is a welcome sign after banks pulled three-figure welcome bonuses throughout March and April as a result of the coronavirus crisis.

Cashback and reward accounts have been cut over the last few years, and Halifax’s account is no exception. It used to pay out £2 a month with far fewer catches, and those who incur the £3 fee won’t see any benefit from the monthly reward being upped to £5.

But with no other cash incentives around right now, it’s almost certainly worth opening the account solely for the £100 upfront welcome bonus, even if you end up closing the account afterwards.

 

Lloyds Bank: offers the best current account for interest on large balances

Best account for interest on a large balance… Lloyds

With cuts to Santander’s 123 account on 5 May and again on 3 August, Lloyds Bank’s Club Lloyds account is now probably a better offer, although the 123 account still offers up to 3 per cent cashback.

Club Lloyds pays 1 per cent on interest on balances of up to £3,999, while those with sums of between £4,000 and £5,000 will earn 2 per cent on that balance. This works out at £60 interest if customers kept in the full £5,000 for a year, an interest rate of around 1.2 per cent.

Overdrafts are charged at 29.9 per cent after a £50 interest-free buffer.

There is no monthly fee if you pay in £1,500 a month, otherwise it charges £3.

However, this blended rate is being cut from 1.2 per cent to around 0.8 per cent in October, with the rate on balances of up to £3,999 cut to 0.6 per cent and the rate on bigger balances cut from 2 per cent to 1.5 per cent.

This is Money verdict 

Cuts to current account interest mean the blended rate of around 1.2 per cent you can get from Club Lloyds on £5,000 is the best rate you can get on balances above £1,500.

The rate itself is slightly better than the best easy-access rate around at the moment, meaning you’d only earn a little less if you wanted to stash it elsewhere. But if you have more than £5,000 burning a hole in your pocket, you should earn a slightly worse rate with another savings bank elsewhere.

And finally…

Best account for your holidays… Starling

Starling Bank‘s current account is a decent all-round option, offering some interest on your balance, a cheap overdraft and best of all no fees for using your debit card abroad.

The only draw back for some might be that it is an app-only bank, however it comes with top customer service – coming second in a recent poll, only beaten by First Direct.

Free use abroad and a cheap overdraft

Starling Bank offers fee-free spending and withdrawals anywhere in the world – a perk unavailable anywhere else.

Rival challenger Monzo previously offered the same deal, but it has since added a cap on free overseas withdrawals of £200 per month, with a 3 per cent charge after that.

The account with beefed up budgeting features. The app lets you categorise your spending, freeze your card temporarily if you lose it and set up savings goals.

The interest paid on balances isn’t going to pulses racing but it’s better than nothing at 0.5 per cent on up to £2,000 and 0.25 per cent up to £85,000.

However this is being cut to 0.05 per cent for all customers from 18 May.

Watch out for 

If you stray into your overdraft there are no usage fees, but interest will be applied at 15 per cent EAR. That’s cheaper than most other banks out there, though this will change in April, with those with a low credit score paying up to 35 per cent.

If you use an unauthorised overdraft, there are no extra fees on top of standard interest and charges are capped at £2 per month.  

This is Money verdict

Starling is a decent all-round option. Its overdraft is one of the cheapest, also appearing in our dedicated guide to the top accounts for those in the red.

It offers a simple low interest rate – less than half that charged by the likes of HSBC or Nationwide.

Travellers often get tripped up when spending abroad, incurring hefty fees of up to 3 per cent every time they use their bank card in shops abroad or at an ATM which means this could be a real money saver long term.


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THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

 

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

 

RBS’s Reward Bank Account pays up to £5 a month you pay out two direct debits a month of £2 each and log into mobile banking. The account comes with a £2 monthly fee and you can get a £100 switching incentive if you pay in £1,500 by 30 December.

NatWest

 

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

 

TSB’s Classic Plus Account pays 1.5 per cent interest on balances of up to £1,500. You must pay out two direct debits, register for internet banking and go paperless.

Nationwide

 

Nationwide’s FlexDirect account comes with 2% interest on up to £1,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays

 

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