Current Accounts With Linked Savings
Open any newspaper's financial pages and you'll see advertisements for current accounts with high interest rates, and it seems at the moment that you can't escape TV ads promising 'something good' which pays up to 50 times as much interest as competitor's offerings.
This is all well and good - for years banks got away with paying negligible rates of interest on our day to day banking balances, so it's obviously welcome that such high rates are now being offered. As is so often the case in finance though, things aren't necessarily quite as they seem.
Earnings Cap
Many of the current accounts that feature in the best buy tables on account of their high interest rates will have a cap on the amount of interest-earning money you can have in the account at any one time, above which a much smaller rate will be paid. If this cap is less than the balance you carry or even your monthly salary, then the amount of interest you can earn will be lower than you might at first think.
Linked Up Accounts
One way to avoid this is to look at a type of current account which won't necessarily feature high up in the comparison tables: those with a low interest rate themselves, but an exclusive linked savings account with a much more generous rate. As these savings accounts will have a much higher maximum interest-earning balance limit, your money has the chance to work harder for you and earn you more overall. It's also usually much easier to transfer money between your current account and the linked savings account, without the three day wait (and loss of interest) found when transferring between different banks.
Savings Type
Don't just plump for the account offering the best linked account rate though, as some of these accounts are the regular saver type, again usually with a maximum monthly deposit and so a limit to your potential interest earnings. Others might only offer attractive rates for an introductory bonus period, after which you might find yourself left with two mediocre accounts and facing the prospect of trying to find a new current account package all over again.
