Current accounts interest rates

When you open up a current account, or any kind of bank account for that matter, you'll want to ensure you're earning as much interest as possible on your deposits.

In the following sections we’ll explain how interest rates work when it comes to current accounts. We will also highlight what you should look out for to get the best rates when opening your account.

Annual Equivalent Rate (AER)

The interest you earn on the balance of your current account is worked out as an annual equivalent rate, or AER. This is not to be confused with annual percentage rates, or APRs.

APR refers to the interest you pay on top of what you borrow when you take out a loan or credit card, while AER is the interest you earn on the balance of your account.

A higher AER is better, as it means you earn more on your deposit.

Current accounts typically have two interest rates: one for the interest you earn on your balance and one for the interest you pay if you go overdrawn.

Both of these rates are given as an AER, but only one is used to calculate money added to your balance, and the other is used to calculate money deducted from it.

Do current account interest rates change?

The interest rates associated with each current account are subject to change, both by the Bank of England and by the account provider itself.

You should always be told if your interest rates are going to change. If yours change and you haven't been notified, you should contact your bank to inquire why.

Finding the best current account interest rates

Getting a current account with the best interest rates is about striking a balance between the interest you earn on your credit and the interest you'll pay if you go overdrawn.

Ideally, you want a high AER for your balance and a low AER for your overdraft.

Several current accounts on the market charge interest according to a tiered system. This means that the AER will change based on how much money is in your account. For example, you might earn a certain percentage on the first £1,000, a slightly reduced percentage on the next £2,500, and so on.

Some will also cap the interest you can earn, so you might only earn interest on your balance up to a maximum of £4,000. It’s always important to read the terms and conditions for each account.

To see what kind of interest rates you could expect, compare current accounts online for free through Money Expert. We’ll show you a list of some of the best current accounts from market leading providers, so that you can be sure that you’ll get a good deal.