Five of the best current accounts to get more from your bank

How hard does your bank account work for you? Hard enough to give you free travel insurance, cashback on your household bills, or simply standout customer service?

Although it is only natural to have reservations over switching from a well-worn account that has seen you through your financial life – possibly since you were a teenager – this is no reason to stay put if you could be getting a better deal elsewhere.

Here we look at some of the best options available to help you to make your money work harder, cut down on fees, or get free stuff.

This is not an exhaustive list of all current accounts around, but as with our Five of the best Cash Isas round-up, we have chosen accounts that we feel stand out for some reason.

Free insurance: Nationwide is offering European travel coverage with its current account

Free insurance: Nationwide is offering European travel coverage with its current account

Santander 123
Santander will pay 1.5 per cent on balances up to £20,000 plus up to 3 per cent cashback on bills (It currently pays up to 3 per cent)
£5 a month pay in £500 a month and two active direct debits
Santander 123 Lite Up to 3 per cent cashback on your household bills£1 a month fee, £500 a month and two active direct debits
First Direct 1st Account
£100 for joining via switch service and £250 interest-free overdraft
Pay in £1,000 a month

Nationwide FlexDirect
5 per cent interest on up to £2,500 and fee-free overdraft, both for the first year onlyPay in £1,000 a month

Halifax Reward
£100 for joining via switch service and from January a £3 monthly bonus (Currently pays £5 per month)

Pay in £750 a month, stay in credit and two active direct debits.
Tesco Bank Current Account
3 per cent on balances up to £3,000 and extra Clubcard points for spending on debit cardNo fee or rules

TSB Classic Plus

3 per cent on up to £1,500 from January 2017( currently pays 5 per cent interest on £2,000) Plus 5 per cent cashback on first £100 of contactless spending each month with debit card or Apple Pay
Pay in £500 a month.

M&S Bank Current Account
£100 gift card for joining via switch service, plus collect an extra £10 a month for the first year in vouchers. Loyalty points for spending on debit card in store and £100 interest-free overdraft

No fee or rules

Metro Bank Current AccountFree debit card transactions in Europe and longer opening hoursNo fee or rules

Club Lloyds

From January 2017 it will pay 2 per cent on up to £5,000 (currently pays 1-4 per cent tiered interest)Plus choice of one lifestyle benefit such as 6 cinema tickets or magazine subscription

£3 monthly fee from January or deposit £1,500 a month (Currently charges £5 each month)
Nationwide FlexAccount Free multi-trip European travel insurance. Three months’ interest-free overdraftPay in £750 a month

First Direct is lording it over other account providers in the popularity stakes and has the trophies to show for it – thanks to a growing collection of customer service awards.

Not only that, for a limited time First Direct will give you £100

The bank heavily backs its customer service department, to the extent that it offer at least £100 to any new customers opening a First Account.

Not only that, if you wish to switch to another bank after six months, but before you have been a customer for 12 months, it will give you another £100 and help you to move.

Another bonus is the £250 interest-free overdraft. After that, interest is charged at 15.9 per cent – still a fairly competitive rate – up to your agreed formal overdraft limit.

Before getting too carried away daydreaming of ways to spend the free cash, it is worth bearing in mind that unless you credit your account with £1,000 in the first three months you will not be eiligible for the £150 sweetener.

You will also have to pay a monthly £10 fee unless you pay in at least £1000 per month. However, if you do fall into the below £1,000 per month bracket, this can be avoided by taking out another First Direct product, like a credit card.

It is worth bearing in mind that First Direct will not consider anyone with ‘adverse credit’ for this account.

First Direct boasts many satisfied customers and it will give you money to join and money to leave if you don’t like it. However, it doesn’t have any branches so if you are the sort of person who likes to do their banking face-to-face, this account may not be for you – although you will be able to use HSBC or Post Office counter services.

Also, if your balance is always firmly in credit, it may be a better option in the longer-term to find an interest-paying current account.

Shop around to see how interest rates compare with the £100 bonus.

Interest: Rates on specialist accounts beat most savings accounts

Interest: Rates on specialist accounts beat most savings accounts

There are a few banks offering in-credit interest, including Nationwide, TSB, Santander and Lloyds Bank.

Some offer 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 5 per cent in-credit interest on balances up to £2,500 for the first year – not bad considering most easy-access savings rates have slid in recent years.

Accountholders are also eligible for a 0 per cent overdraft for the first 12 months, and reduced fees of 50p per day for arranged overdrafts after that.

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.

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

The 5 per cent interest deal ends after a year, when it drops to just 1 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 a flat rate charge of 50p per day applies, this will be costly for those who regularly go overdrawn compared to a typical interest-charging overdraft.

Unarranged overdrafts cost 50p per day for balances under £10 and £5 per day after that, capped at £60 per month.

If you like to carry out your banking face-to-face, this account might not be good for you because you can only access internet or telephone services as a FlexDirect customer.

Accounts that are good for both in-credit and overdrawn customers are few and far between.

Remember as mentioned above, existing customers can boost their earnings by recommending Nationwide current accounts to their friends. For every person that switches on your recommendation you will both be rewarded with £100 in your account.

Every little helps: Halifax offers £100 to switch

Every little helps: Halifax offers £100 to switch

Halifax currently offers £100 to switch plus a monthly bonus of £5.

From Janurayr 2017 the bonus will drop to £3 per month, however account holders can still earn £136 in your first year.

If you switch to the Current Account or Ultimate Rewards Current Account you will also get the £100 bonus, but not the £3 monthly reward.

A £12 monthly fee applies for the Ultimate Rewards account if you pay in £750 a month stay in credit and have two direct debits from the account (It costs £10 up until January 2017).

However it includes benefits such as travel insurance, mobile phone insurance and breakdown cover.

Account holders can also buy commission-free foreign currency, which will be delivered to your home for £5, or a local branch free of charge if you order it on the phone.

The bank also has a cashback scheme which offers between 5 and 15 per cent cashback in certain stores for customers of any of its current accounts who use online banking.

To qualify for the £100 switching incentive customers will need to use the current account switching service, automatically closing their old account.

It also requires the transfer of a minimum of two direct debits and a monthly deposit of at least £750 and stay in credit.

If you’re successful in applying for a planned overdraft you will not have to pay any fees for six months – so long as you stay within your agreed limit.

Planned overdrafts cost £1 daily up to and including £1,999.99, £2 up to £2,999.99 and £3 for overdrafts of £3,000 or above.

Unplanned borrowing cost £5 daily, regardless of amount. Remember, if you’re slip into your overdraft you will lose your £5 payment the following month.

If you are overdrawn by £50 or less you won’t pay any planned or unplanned overdraft fees – and if you are able to pay in enough money to return your bank account back in credit by the end of the day you won’t be charged at all.

Finally, the £5 reward is ‘net’ of income tax, which means we pay it after taking off income tax at the rate set by law (currently 20 per cent). If you’re a higher-rate taxpayer you may have to pay extra income tax on the reward payment.

This is one of the best free money deals available at the moment if you are thinking of sticking with your new bank for the long-term – so long as you stay in credit.

If you often find yourself slipping into the red, it is probably not the best account for you as you won’t be reaping the full benefits.

Santander: offers the best current account for cashback

Santander: offers the best current account for cashback

In a second blow to account holders Santander has halved the interest customers can earn on their balance.

From November 1, any one with a 123 Account will be paid just 1.5 per cent.

The bank also recently hiked its monthly fee from £2 to £5.

However this could still be the best in-credit interest account for those with a large balance.

If you are looking for a more profitable account for smaller balances check out our pick of the best interest-paying current accounts.

With savings rates stuck at all-time lows, this account could also be a good alternative to savings accounts.

The 123 account will pay an AER of 1.5 per cent on the entire balance. This means those with £20,000 in their current account will earn a yearly income of around £302.

Previously accountholders would have earned up to £604 a year. However the 1.5 per cent rate is still high enough to beat the best easy access savings accounts.

Interest is clocked up on a daily basis and will depend on what you have in your account that day.

The £60 annual cost will negate some of the benefits of its cashback and interest payments.

Also, if your balance falls bellow £1,000 on any day of the month – even by £1 – you will earn no interest at all on the entire balance for that day.

As well as the potentially high interest benefits, the 123 account could be a smart choice because it really makes your money work for you, thanks to up to 3 per cent monthly cashback on key services such as mortgage payments, council tax bills, electricity, gas, mobile and home phone, broadband and TV packages.

Household bills exclude your TV licence, maintenance/ insurance contracts, commercial use or commercial mortgages.

Both the interest and cashback you earn is paid directly back into your 123 account on a monthly basis.

To be eligible for cashback services you must set up a minimum of two direct debits and pay in at least £500 every month. But to get the most benefit from this account, it’s best to retain a credit balance of at least £1,000 – this might be easier if you are a couple sharing the account with two salaries.

This account is really not for you if you often find yourself in the red. Arranged overdrafts are charged at £1 a day. Unarranged overdrafts shoot up to £6 a day with no cap on unauthorised borrowing.

Santander says that you will not be charged more than £95 in fees for any one month.

At the moment they are also offering a free arranged overdraft for four months if you switch to the 123 account using their switcher service. The size of the overdraft will depend on your circumstances.

In reality, the cut to the 123 account interest rate combined with the monthly fee, means this is no longer the great deal it once was for many.

That said, for those with considerable savings, the 123 current account will remain a good deal despite the fee hike.

If there is any chance of you slipping into your overdraft, there is little point applying for the account as the combined charges and monthly fee are likely to cancel cash benefits.

Santander says the average balance held in the account is £12,500, which equates to £126.25 profit – excluding cashback – even after fees have been taken in to account.

However those with a smaller balance may be best off switching to a free option.

Read our detailed look at whether Santander 123 still pays off.

If the idea of a one-off cash boost is something that appeals to you it is worth noting that there are a few banks offering ‘golden hellos’

M&S Bank is currently handing new Current Account customers a £100 gift card when they sign up plus a £10 top up each month for the first year. It comes with a £100 interest free overdraft buffer and access to a regular saver paying 6 per cent (for more info see below).

Customers can opt in to get a £5.50-a-month boost to their balance. You get £4 and an additional 5p per debit card transaction (max £1.50) per month.

To qualify for the perk you must pay in at least £800 each month, pay out at least four direct debits each month, stay within your limit, log into online or mobile banking and opt out of paper statements.

HSBC will pay switchers £150 to sign up to its Advance Account and an extra £50 after the first 12 months.

To qualify you must use the Current Account Switch Service to move over two or more active direct debits or standing orders within 30 days, plus sign up for mobile or online banking within 60 days.

The account also requires a £1,750 monthly minimum deposit.

Sun,sea and sand: Nationwide offers free travel insurance with its FlexAccount

Sun,sea and sand: Nationwide offers free travel insurance with its FlexAccount

While many accounts have individual perks that make them stand out over others, Nationwide’s FlexAccount’s overall offer is one of the most comprehensive when it comes to little extras.

Travellers can take advantage of the free multi-trip European travel insurance. Nationwide’s travel cover has been rated five stars by Defaqto and includes perks such as £1,500 baggage cover.

Skiers and snowboarders should bear in mind that winter sports cover is an added extra, however.

The deal does not include any waivers on overseas charges however using the debit card abroad is fairly cheap in comparison to some banks. It charges 2 per cent transaction fee and a £1 cash withdrawal fee.

The FlexAccount deal also includes access under its Flexclusives to better savings and mortgage rates and discounted home insurance and personal loans deals.

You have to be able to be able to pay in at least £750 into your account monthly to ensure your travel insurance cover does not lapse.

However, if you’re one of those people who finds themselves hovering between black and red towards the end of the month, it could be worth looking elsewhere. Interest is charged at a fairly high 18.9 per cent for both arranged and unarranged overdrafts.

For every payment that accountholders make beyond their arranged overdraft a £15 transaction fee is applied. Charges are capped at £75 per month.

To soften the blow, cardholders are given three months’ interest-free agreed overdrafts as an introductory sweetener after switching existing direct debits and standing orders to the new account.

Overall, this account is a good choice, especially if you travel regularly to Europe and can make the most of the free travel insurance offered, want lower charges for spending abroad than most banks and want access to the Flexclusive range of rates on mortgages, savings and loans.

Shopping rewards: M&S Bank gives switchers a £100 welcome voucher to spend in stores

Shopping rewards: M&S Bank gives switchers a £100 welcome voucher to spend in stores

M&S has relaunched its £220 switching bonus in its push to draw in customers to its current account.

New customers get £100 in M&S vouchers when they sign up plus a £10-a-month gift card top up for the first 12 months.

On top of this you can earn an extra £96.63 gross in interest over the course of a year if you make use of the attached regular saver account and deposit the maximum £250 each month.

Fans of M&S can earn extra reward points for swiping their debit card in stores and have access to a simple and generous overdraft when opening a free M&S Bank Current Account.

To get their hands on the giftcard, switchers must move their everyday banking to the account within six months of opening, using the bank’s dedicated switching service. This includes switching over direct debits and standing orders.

The current account also rewards shoppers with M&S points when paying using their debit card in stores. It pays 1 point per £1 spent in store and online.

500 M&S points are worth £5, so they may take a while to rack up, but can be used to buy most things in store. Points will be converted to vouchers and sent to customers four times a year automatically.

If that wasn’t enough, The account also comes with a decent automatic £500 overdraft. It comes with an interest-free buffer of £100 where many standard accounts only offer £10.

There are no extra overdraft usage charges and flat rate 15.9 per cent interest applies to both authorised and unauthorised borrowing.

Another major perk for borrowers, the bank does not apply any extra usage fees for spending beyond the agreed limit, bounced payments and paid items unlike most other current accounts.

The extra cherry on top of the M&S account is customer access to a 6 per cent regular savings account deal. This allows you to put away between £25 and £250 a month for 12 months, which could earn you up to £96 in interest.

Interest beyond the first £100 of your overdraft costs 15.9 per cent, which although lower than most, will still mount up if you do not clear the debt.

When using your debit card abroad there is a non-sterling transaction fee of 2.75 per cent for purchases and withdrawals, however the bank does not apply an additional cash withdrawal fee, saving around 3 per cent compared to most of its competitors.

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