Current accounts as savings vehicles

High interest current accounts are often thought of as the modern-day savings account. After all, they can offer higher rates of interest than the majority of savings accounts in the market, so surely they're the perfect home for your savings? Well, perhaps not. The low investment limits mean they simply won't be suitable for anyone with a significant savings pot, so although they may have the best savings rates, you probably won't get the best returns for your money.

Take a look at the top high interest current accounts and you'll soon see why they initially seem appealing. The top rate on offer tends to be quite a bit higher than the top savings bond rate, and they don’t require you to lock your money away for five years or more to get it.

However, if you look a little closer, high interest accounts may not be as appealing as they seem. While you’ll be able to get a high interest rate, it’s almost always the case that you'll only be able to save up to a certain amount at those rates, with additional funds in the account not earning any interest whatsoever. These deals also come with additional restrictions, such as monthly funding requirements and direct debit conditions, so it may not be that simple to profit from these accounts.

The only way anyone with more than a few thousand pounds to invest will be able to make these accounts work is to engage in a bit of crafty behaviour. You could open several high interest accounts (one with each top-paying provider) and split your savings between them, and from then on move your monthly income between them on a standing order basis, thereby ensuring you hit the funding targets.

However, this is always assuming you'll be able to meet the additional requirements of individual accounts, and with most requiring at least two direct debits to be held with them, it may not be that simple. Of course, for those who are happy with that kind of commitment and regular planning, it could pay off – but what if you've got larger sums to invest and don't want the hassle of dealing with several different accounts? This is when you'll probably want to think more traditionally.

Let's say you've got a £50,000 savings pot that needs a new home. You could syphon off a few thousand to put into a high interest current account, but it may not seem worth it – these deals are great for smaller sums, but if you've got a large investment, here's what else you can try:

• Commit to a fixed rate bond

Quick, simple and effective – fixed bonds offer the best savings rates among traditional accounts, so if you simply want to see your pot grow and don't mind locking it away for a few years in order to do so, it could be just the thing.

• Maximise your ISA allowance

Your ISA allowance should never be overlooked, particularly as your level of investment could well bring you over the personal savings account limit.

Or what about a stocks & shares ISA? It could be the ideal solution, particularly if you're comfortable with an element of risk, given that stocks & shares ISAs have historically vastly outperformed their cash counterparts, so you could be in the money in a number of years. This kind of investment could easily overtake the returns on high interest current accounts, too. However, your capital is at risk, and performance may not be repeated in the future.

So, are current accounts really best for savings? If you have a lot to save, probably not – a far better solution could be to look at traditional savings accounts, ISAs or their stocks & shares alternatives.

As always, however, it’s best to have multiple means of saving. So, you’ll want a bank account that can offer you interest, cashback and/or cheap overdrafts, as well as perhaps an easy access savings account for an emergency pot that you can keep out of arms reach, and more long-term savings vehicles for the main bulk of your savings.