Earn 5% on your current account

Traditionally, most of us didn't expect to earn a bean on our current accounts. Or rather, we earned interest of 0.1%, which amounted to the same thing. We expected to get a far more generous rate of interest on our savings. But in recent years, those assumptions have been thrown into reverse. The average easy access account now pays a meagre 0.62%. Many older 'dormant' accounts pay just 0.1%. 

By contrast, a number of current accounts now pay eye-catching interest rates of up to 5%. Naturally, they come with a few catches. 

Challenger bank TSB recently launched its Plus account that pays 5%, but only on balances up to £2,000. You also have to pay in at least £500 each month. Even if you have the full balance, you will earn interest of just £100 a year.

The Nationwide FlexDirect pays 5% on a slightly larger maximum balance of £2,500, but for a limited period of just 12 months. After that, you get just 1%. You also have to pay in £1,000 a month. The new seven-day switching rule has made it easier to chop and change current accounts, but switching to these accounts still seems a lot of effort for little reward.

Lloyds has just launched its new Club account paying an interest rate of 4% on balances up to £5,000. This one comes with a whole raft of catches. To get that 4% interest rate, you must use this as your main current account, pay in £1,500 each month, and set up at least two direct debits. You will only get that 4% headline rate if your balance is between £4,000 and £5,000. If you have a lower balance, you will get less interest: 1% on balances between £1,000 and £2,000, rising to 2% on balances between £2,000 and £4,000.

If you take out this account, however, you do qualify for a new Monthly Saver account from Lloyds, which pays 4% on savings up to £400 a month. Couples who take out a current account each, with the full £5,000 balance, and one joint savings account, could earn total interest of £588 a year. Now that may well be worth the effort. Be warned, however, there are hefty charges for those who dip into the red. 

The popular Santander 123 account pays 3% on balances between £3,000 and £20,000, plus cashback on household bills, mobile phone and broadband costs, and so on. Inevitably, this also comes with a string of catches.

You need to maintain a minimum balance of £1,000, pay in at least £500 a month, and set up two direct debits. There's also a £2 monthly fee. 

So yes, you can earn up to 5% on your current account, if you are ready to jump through a lot of hoops.

Given today's dismal savings rates, many people will be willing to do just that.