High Interest Current Accounts

RG2015

I have a Tesco Bank current account that I only use as a savings account with £3,000 earning 2.96% gross each month. If I used this as a bank account was intended I would earn less interest. The same would apply to any high interest current account.

Therefore there appears to be no financial benefit in using an interest bearing current account for day to day banking transactions.

Does this make sense or am I missing something?

Terry_Towelling

I take your point, but if it is your only account, then it makes perfect sense to have it and you'd only earn less interest if your balance dropped below £3K - or whatever the interest threshold is for your chosen account.

There may also be other incentives to use it as normal - e.g. cashback for debit card transactions/direct debits/clubcard points.

On the whole, though, I'm with you and I only use them as savings accounts.

EachPenny

RG2015 wrote: »

I have a Tesco Bank current account that I only use as a savings account with £3,000 earning 2.96% gross each month. If I used this as a bank account was intended I would earn less interest. The same would apply to any high interest current account.

Therefore there appears to be no financial benefit in using an interest bearing current account for day to day banking transactions.

Does this make sense or am I missing something?

It depends if you are willing to expend the effort to ensure the balance is topped up to £3000 every day, prior to the point where the balance is checked for the purposes of calculating interest.

For fixed outgoings DDs and SOs then it would be feasible to arrange SOs from a lower interest account to be paid in automatically on the right day to do the top up, and perhaps you could make a note of what you spend on the debit card during the day and make a manual transfer of that amount as well.

But you would have to accept that you will sometimes be slightly over or under the £3000 point and therefore missing out on some interest. However is the amount of lost interest involved were enough to keep you awake at night then perhaps an alternate strategy would be advised.

The other possible 'missing' thing is that if you only have £1500/£3000 (TSB/Tesco) or less in savings then having all the money in that 'top' interest paying current account being used for day to day banking would be the most advantageous option (on the assumption you were unwilling to open any of the 5% RS accounts).

jimjames

RG2015 wrote: »

I have a Tesco Bank current account that I only use as a savings account with £3,000 earning 2.96% gross each month. If I used this as a bank account was intended I would earn less interest. The same would apply to any high interest current account.

Therefore there appears to be no financial benefit in using an interest bearing current account for day to day banking transactions.

Does this make sense or am I missing something?

I have the same Tesco bank account and use it for day to day banking. Each day I ensure that the balance is still optimised for getting the most interest so yes I think you are missing something.

For many people their balance will be below £3000 so the benefit to them is that they get a decent interest rate on all the money in their current account instead of an account paying nothing.

JamesRobinson48

For what it's worth, I do regularly use one of my Tesco current accounts for debit card payments, and I always top it up to £3,000 by end-of-day by FP from another current account that pays less interest. Chasing pennies as usual.

agrinnall

RG2015 wrote: »

Therefore there appears to be no financial benefit in using an interest bearing current account for day to day banking transactions.

Does this make sense or am I missing something?

I don't think you're missing anything, it is so easy to have multiple current accounts that the simplest thing to do with the Tesco accounts is to put £3000 in them and leave it there, with no transactions other than transferring out the interest each month - it's what I do. My everyday banking is done using other accounts that either pay less interest but on more or less unlimited amounts or pay no interest but offer other facilites that are of use, such as the travel insurance from my Nationwide FlexAccount.