Looking for a better bank? This is Money's five of the best current accounts


By Amy Andrew

Published: 10:33 EST, 5 February 2013 | Updated: 09:19 EST, 8 June 2015


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

Account for...free overall perks: Nationwide 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.

Its worth noting that when any existing FlexAccount, FlexDirect or FlexPlus customers recommend one of the building society’s current accounts, and that person switches their main account to Nationwide using the Current Account Switch Service, both parties will receive £50.

You can recommend 12 friends a year meaning you could earn up to £500.

Travel insurance and cheaper overseas spending

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 personal possessions cover.

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

Nationwide sadly axed the accounts fee-free overseas spending some years ago, however, its charges for taking cash out and spending are a good notch lower than most main rivals - so travellers benefit here too.

Access to better rates on savings, mortgages and loans

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

savings rates alerts

Watch out for

You have to be able to be able to pay in at least £750 into your account monthly or complete an account transfer within the first four months from a non-Nationwide account. You need to keep paying in this £750 every month 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.

This is Money verdict

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.

Account for free money... Halifax Reward Account

Halifax is offering a deal which means you can earn up to £185 in your first year.

£5 reward and £125 to switch

The bank is currently offering new customers £125 when they switch, plus a monthly £5 reward.

The deal applies to its Rewards Current Account, Current Account and Ultimate Rewards Current Account (although a £15 month fee applies).

Every little helps: Halifax offers £100 to switch

Every little helps: Halifax offers £100 to switch

Accountholders can also buy commission-free foreign currency, which will be delivered to your home or local branch free of charge if you order it on the phone - otherwise it will cost 1.5 per cent.

The bank has also recently introduced a new rewards scheme, which offers between 5 and 15 per cent cashback in certain stores for customers of any of its current accounts.

Currently there are partnerships with Morrisons, Hertz, Ocado, Glasses Direct, Argos, Urban Outfitters, Homebase, Oasis, O2, Domino’s Pizza, Pets at Home, Marriott, Play.com, Q-Park, New Look and The Body Shop. There is no cap on the amount you can earn.

Halifax estimates that a customer who uses their plastic three times a month in these shops and spends at least £30 will earn an average of £108 a year.

The small print

To qualify for the £125 switching incentive customers will need to use the current account switching service, automatically closing their old account.

To get hold of the £5 rewards customers will also need to transfer a minimum of two direct debits and pay in at least £750 into the account every month and remain 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 overdraft 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 overdrafts 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 Money verdict

This is the best free money deal 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

Account for…cashback and savings interest: Santander 123

The Santander 123 current account is an intriguing proposition, it pays both cashback on spending and interest on balances.

Interest on savings

With savings rates stuck at all-time lows, this account could also be a good alternative to savings accounts - the bigger your balance, the more interest is paid on the account.

To start with, for credit balances of £1,000 or more, the 123 account will pay an AER of 1 per cent on the entire balance.

Once your balance reaches £2,000 or more, you will earn interest of 2 per cent, and if it reaches £3,000, the maximum interest of 3 per cent will kick in. Interest is clocked up on a daily basis and will depend on what you have in your account that day.

Watch out if your balance falls below £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.

Cashback

RETAILER OFFERS

Santander has recently launched a Retailer Offers scheme which makes personalised cashback deals available to all current account and credit card customers.

Accountholders can access the deals through their online banking for free and will be given between four and seven new deals a month.

Once these are activated payouts are earned simply by spending using their debit cards automatically.

Over 100 brands including are signed up, New Look, Argos, Gourmet Burger Kitchen, Hertz, Patisserie Valerie and Heals with cashback rates of up to 15 per cent.

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, maintanance/insurance contracts, commercial use or commercial mortgages.

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

Watch out for

There is a monthly fee of £2, and 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.

This is Money verdict

Santander's 123 really does offer something different and rewards both saving and spending. 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.

Prospective account holders can be new customers or already bank with Santander. However, even if you are won over by the range of benefits included in this account, recent negative reports surrounding Santander's customer service could put you off taking the leap.

Account for customer service: First Direct 

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

People skills

The bank heavily backs its customer service department, to the extent that not only is it offering £125 to anyone that opens a First Account.

If you wish to switch to another bank before you have been a customer for 12 months, it will give you another £100 and help you to move.

Interest-free overdraft

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.

Watch out

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 every month you will not be entitled to the £100.

More importantly, you will have to pay a monthly £10 fee, although if you fall into below £1,000 per month bracket, this can be avoided by taking out another First Direct product, like a credit card. First Direct will not consider anyone with 'adverse credit' for this account.

This is Money verdict

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, First Direct does not 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 £125 bonus.

FREE CASH: MORE TOP OFFERS

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'

Co-operative Bank has added a £100 cash incentive for those signing up to both its Standard Current Account and its Current Account Plus. It will also pay £25 to a charity of your choice.

If you are looking for a small overdraft buffer, The Current Account Plus could be a good option as it comes with a £200 overdraft buffer, although will have to commit to paying in £800 each month into the account.  

M&S Bank has recently added a new free Current Account to its ranks. The account comes with £100 of M&S vouchers for switchers. It also rewards shoppers with M&S points on their shopping and has a low cost overdraft with a £100 free buffer (see below)

Account for in-credit interest: Nationwide's FlexDirect Account

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

Best interest rate

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.

Every little helps: Nationwide offers the best interest-paying current account

Every little helps: Nationwide offers the best interest-paying current account

Account holders 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.

Watch out

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.

This is Money verdict

Accounts that are good for both in-credit and overdrawn customers are few and far between. This account is a market-leading option for the first 12 months, but you may want to switch to another account once the introductory offers have gone.

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 be rewarded with £50 in your account. This works for up to 12 people, meaning you could potentially earn up to £500 a year.

GOT A BIGGER BALANCE OR WANT A LONG-TERM DEAL?

Lloyds bank's new Club Lloyds Account pays 1 per cent on in-credit balances of between £1 and £1,999, 2 per cent up to £3,999 and 4 per cent up to £5,000 for an unlimited period.

Lloyds says a saver with £5,000 in the account could get a maximum of £196 in interest per year, which actually works out as 3.93 per cent return as interest is calculated monthly. Customers must pay in at least £1,500 a month into the account.

Although Lloyds Bank pays interest on a larger balance, TSB's Plus Account is a better option for those with a smaller balance

It pays 5 per cent on balances of up to £2,000, earning up to £80 after 20 per cent tax and £60 for higher rate payers. But it has the added bonus of allowing two accounts per person.

A £2,000 balance held with TSB would benefit from 5 per cent interest - while the interest tiers on the Lloyds account mean that the first £3,999 only receives 2 per cent interest.

TSB also requires a much smaller monthly deposit of just £500.

Tesco Bank offers 3 per cent interest on balances of up to £3,000 and added opportunities for Tesco shoppers to earn Clubcard points.

New customers are not required to swap over any direct debits to the account but it will cost account holders £5 a month for every month they do not deposit £750.

Customers can open both a personal and joint account - for a couple this means 3 per cent interest on up to £9,000.


Account for ...a cheap overdraft and shopping rewards: M&S Bank

M&S shoppers can earn extra reward points for swiping their debit card in stores as well as bagging themselves a generous £100 welcome voucher and a simple and generous overdraft when opening a free M&S Bank Current Account.

Rewards points

M&S Bank has recently added a new free Current Account to its ranks jam packed with worthwhile perks including a tempting sign-up bonus of £100 in M&S vouchers.

To get their hands on the vouchers, 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.

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.

Watch out for

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.

This is Money verdict

It will take time to clock up significant amounts of reward points to be turned into vouchers, loyalty points could be a great added bonus for those that find themselves frequently shopping in M&S stores or who are already enrolled in the rewards scheme through an M&S credit card.

The account comes with some useful perks particularly for those who frequently find themselves drifting into their overdraft. 

The lack of annual fee or minimum monthly deposit requirement makes the account a great, and cheap, all-rounder. Customers may also find it useful being able to access branches in M&S stores seven days a week.

...AND ONE FOR LUCKY TRAVELLERS 

Account for… free overseas transactions: Norwich and Peterborough Building Society's Gold Classic

Norwich and Peterborough Building Society's Gold Classic account offers numerous free perks and services, helping you to save money when managing your finances.

No overseas charges

No charges: Norwich and Peterborough customers enjoy fee free foreign transactions

No charges: Norwich and Peterborough customers enjoy fee free foreign transactions

The standout feature on this card is its fee-free foreign transactions. If you travel a lot, it could be a great money saver – although you will have to pay the exchange rate, Norwich and Peterborough Building Society will not charge you for either using your card or withdrawing money from an ATM abroad.

But it is not just the free overseas spending that makes this account so appealing. Other eye-catching deals include a £250 interest-free overdraft for six months when you switch, and free Sentinel Gold cover for your personal belongings.

The final cherry on the cake is an offer which comes free with the account that allows you to trade shares at a discounted flat rate of £8.95 online or £14.95 over the phone.

Current account holders also have exclusive access to a range of savings accounts with preferential rates.

So long as you pay in £500, or maintain a balance of £5000, there is no monthly fee - otherwise you will be charged £5. Interest is not paid on your balance.

Watch out for

If you often find yourself overdrawn, you will need to take care. Agreed and unagreed overdrafts both incur interest at a rate of 17.9 per cent, as well as a monthly £5 fee. Unapproved overdrafts cost £19 a month, and paid and unpaid charges will clock up an additional £15 each. However, Norwich and Peterborough do allow a £10 fee-free buffer, just in case you go slightly over by mistake.

If you use the dedicated N&P switching service to move your direct debits and standing orders across to your new Gold Classic account, then you will benefit from no charges and no interest on your overdraft for the first six months. Charges and interest will apply if the £250 limit is exceeded.

This Is Money verdict

This is a great account for anyone that regularly uses their card abroad. It will make life easier when you are overseas - you don't need to think about going into a bank or taking all your cash out at once to avoid lots of charges.

Possessions insurance is also a nice touch – with handy free services if you find yourself in a fix on holiday or at home.

However, if you do often find yourself overdrawn, fees and interest after the first six months will quickly cancel out any savings you make on foreign transaction fees and possessions insurance.

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