Current account interest rivals some savings accounts

In a new report, financial website Moneyfacts has found that some high-interest current accounts offer high enough interest that they could be considered as an alterative to a traditional savings account. Some of these accounts, the website says, are currently offering current accounts with interest at six percent or higher, higher than any available instant access savings account.

There are some catches, however. Among some of the banks offering over six percent interest on these accounts, the maximum balance in the account offered by Abbey, part of Grupo Santander (LSE: BNC; NYSE: STD), is £1,000, while Halifax, part of HBOS (LSE: HBOS), and Alliance & Leicester (LSE: AL) each put a cap of £2,500 on the current account they offer. If the amount in the account exceeds the cap, that amount only earns 2.5 percent interest at Abbey and only 0.1 percent at Halifax and Alliance & Leicester. Clearly, then, using a current account as a savings account is not the answer for everyone.

There are, however, some current accounts offered that combine healthy interest rates with the ability to keep larger amounts in the account. One such account, at Coventry Building Society, offers 5.85 percent for the first two years on up to £250,000, but the interest drops to 5 percent after that. A representative of Coventry, however, warns that it is easy to be drawn in by the offer of high interest on a current account and that before opening such an account, the customer needs to check that the high interest rate offered covers all the money in the account.

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