Can you use a current account for savings? Pros and cons explained

At a glance

• High interest current accounts allow you to earn interest on a portion of your savings, or simply your regular income.
• Account restrictions mean that savers won’t be able to get a return on more than the first few thousand pounds held in the bank account, and they’ll likely need to comply with strict funding and other requirements.
• Consider multiple savings vehicles to make the most of your hard-earned cash.

High interest current accounts can be a great addition to your savings portfolio. Many offer in-credit interest rates that can rival those of standard savings accounts, though because they come with restrictions, it’s important to know how you can use them to your advantage.

Choosing the best current account for savings

The top high interest current accounts can offer appealing savings rates, and because they’re current accounts, you’ll get instant access to your cash whenever you need. This can make them an attractive prospect for savers looking for a convenient, simple home for some of their excess cash, but there are things you’ll need to consider to make sure you’re getting the best current account for your savings.

Look at the interest rate

The interest rate is the first thing to consider. You’ll want to make sure that it’s as high as possible while ensuring that the other features meet your needs as well. Luckily, the very best high interest current accounts can rival savings accounts at rate level, so make sure to see what’s on offer. Just bear in mind that the options are more limited, so you can’t be as choosy.

Consider the terms and restrictions

All high interest current accounts will come with certain terms that you’ll need to adhere to in order to secure the interest rate. This is typically things like minimum funding amounts (you might be expected to deposit at least £1,000 a month, for example) and direct debit requirements (such as having a minimum of two direct debits linked to the account).

Always make sure you can meet the requirements of the account, otherwise you likely won’t be eligible for the interest rate.

Check the interest/balance limit

It’s especially important to bear in mind that most high interest current accounts will only pay the headline rate up to a certain balance, and some will have a time limit on it as well (such as interest will only be paid for the first 12 months). Make sure that these restrictions suit your needs.

See if you’re getting any other perks

Choose your account wisely and you could enjoy other perks as well, such as low overdraft charges, packages that include travel or gadget insurance, and cashback on your spending or everyday bills. Some might offer switching incentives too, offering a little extra to add to your pot.

Check for charges

Make sure to consider the potential downsides of the account as well, such as the charges you may have to pay, to make sure it won’t outweigh the amount of interest you’ll be able to earn.

Using a current account vs. a savings account

Current accounts are arguably the best place to keep your monthly income, whether or not you’re planning on “saving”, so the chance to accrue a bit of extra interest on top of your usual earnings – while keeping your cash accessible – could be seen as an easy win.

However, there are some drawbacks to be aware of as well. Many high interest accounts have low investment limits, which means you'll only be able to keep a certain amount of cash at the headline rate, and any additional funds in the account won’t earn any interest whatsoever.

These deals also typically come with additional restrictions, such as monthly funding requirements and direct debit conditions, while some charge monthly fees as well, so it may not be that simple to profit from them.

Then there’s the fact that savings accounts tend to offer better rates, and because there won’t be the same kind of investment limits, they ultimately offer a better return. This remains the case with easy access accounts, so you’ll still be able to access your money while securing a greater level of interest than you could get from a current account.

Yet if you’re already using a savings account, there’s nothing to stop you from having a high interest current account as well – one that you use for your regular income and can earn some additional interest on your usual balance, rather than using it as a savings vehicle in its own right. Just make sure that you check the terms and conditions – particularly when it comes to things like charges – and you can make your money work harder at every level.

Finding the right home for your savings

High interest current accounts could be a great way to profit from your everyday income, but if you've got a larger savings pot, you’ll probably want to think more traditionally. You’ll need to consider things like whether you’ll need access to your cash, the risk you want to take with your money and how to maximise your tax-efficiency, so here are a few options you may want to consider:

• Easy access accounts: The simple alternative to a high interest current account could be an easy access account, giving you easy access to your cash with fewer restrictions. These are particularly suitable for those who want to build an emergency fund, giving a financial buffer should the unexpected happen.
• Fixed rate bonds: Looking for a higher rate? Fixed bonds tend to 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 in order to do so, it could be just the thing.
• Notice accounts: If you don’t want to lose access to your cash for too long, what about notice accounts? They could offer the ideal compromise between rate and flexibility, boasting rates that in some cases can compete with longer-term bonds but with notice periods that are far less restrictive.
• Cash ISA: Your ISA allowance should never be overlooked, particularly if you’ve got a big enough savings pot that could bring you over the Personal Savings Allowance (PSA). Get started by comparing the best cash ISAs.
• Stocks & shares ISA: If you’ve got a higher risk appetite and are looking more at investments as opposed to cash saving, a stocks & shares ISA could be the ideal solution. Stocks & shares ISAs have historically outperformed their cash counterparts over the long term and returns are still tax-free, but just remember that your capital is at risk, and performance may not be repeated in the future.