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Before scouring the high street or the internet for high interest current accounts, it is probably worth spending a moment or two to consider your current borrowing. If you are almost permanently overdrawn on your present current account, or you have significant balances on credit or store cards, or other high-interest short-term personal loans, you could first start saving money by paying off some of that debt.

The reason is simply that debt is expensive, while earnings from any credit balances on even a high interest current account generate relatively little income. The cost of servicing expensive debt can in no time at all completely outweigh the benefits of anything earned in even the highest-paying current account.

With that wealth warning out of the way and the bulk of the outstanding debts paid off, however, high interest current accounts are certainly worth seeking out at a time when all banks and building societies are looking for customer deposits from almost any source. To this extent, high interest current accounts can be regarded as something akin to a savings account, with regular and instant access. The “high interest” from the customer’s point of view, of course, applies only whilst the current account is in credit. Indeed, depositors will want to take care that high interest rates on current account credit balances do not become even higher interest rate charges as soon as the account goes into the red.

Once again, therefore, it is worth stressing that high interest current accounts are essentially for those who are reasonably confident about staying in the black.

If you are confident that the advertised high rate of interest on a current account is not likely to be swallowed up by monthly forays into the red, it is next worth a further look at that advertised rate. Has it been packaged as part of a bundle of other features, for which the bank or building society will be charging a monthly “membership” fee? If it has, then how does this affect your view of the savings you will be able to earn from the “high interest” on your credit balances? If you are paying for these benefits, this cost will need to be deducted from any income you would expect to make as a result of the account’s high rate of interest.

If your search for a high interest current account appears to have ticked all the right boxes, the good news is these days switching to a new current account with a different bank could not be easier. Almost all banks have shared the ability automatically to transfer direct debits and standing orders on your behalf, which should make the process easier. When you have found the new account that suits you in terms of the interest it pays on your credit balances all that remains is for you to notify anyone who needs to make payments into the account (your employer first and foremost, of course).

Confused.com is one of the UK’s biggest and most popular price comparison services. Confused.com helps consumers save money on everything from current accounts to mortgages.

Gemma_Stanbury

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