Current accounts with interest, explained
Current accounts that pay you interest allow you to earn money on your bank balance. To access the best current account interest rates, you may need to pay a monthly fee. However, there are accounts, such as Biscuit from Zopa, that allow you to start earning interest for free.
In our guide we explore how current accounts with interest work, what a high-interest current account looks like, and how to pick the right account for your financial needs.
Do current accounts pay interest?
Most current accounts don’t pay interest, as they are designed for everyday spending rather than saving. However, it is possible to find both free and paid-for current accounts that earn interest, meaning you can make money from the balance sitting in your account.
How do current accounts with interest work?
Current accounts with interest work like any other current account. You use them for your everyday banking, such as buying your weekly shop or paying your energy and broadband bills.
The one big difference is that you’ll earn interest on your balance. And the more money you have in your account, the more interest you can earn. However, be aware that some accounts may come with a limit on how much interest you can earn.
Another thing that can affect how much interest you earn each month is whether your rate is fixed or variable. If the rate is fixed, the interest rate won’t change for a set period of time, or at all.
If the interest rate is variable, it will go up and down, usually in relation to the Bank of England base rate. This is another reason why the amount of interest you earn each month may change.
Eligibility requirements
Whether your account is free or comes with a monthly fee, there may be terms and conditions you need to be aware of in order to start earning interest. This can include:
Minimum monthly deposits into your account.
Minimum Direct Debits payments leaving your account each month
A limit on the balance you can earn interest on. For example, you may only be able to earn interest on the first £1,000 in your account.
With Biscuit from Zopa, you’ll earn interest without jumping through hoops. No minimum monthly deposits. No need to set up Direct Debits. And no cap on how much you can earn with 2% AER interest on your balance.
How often do you receive interest on your current account?
The interest earned on your current account is usually paid out on a monthly basis. It’ll be automatically added to your balance, without you needing to do anything to claim it.
While interest is typically paid monthly, banks will advertise their interest using an ‘annual equivalent rate’ (AER). AER shows you the rate you’d get if this monthly interest was compounded and paid once a year instead of month-by-month. Banks use AER to make it easier for customers to compare different interest rates.
Best free current account interest rates
We believe that Biscuit is one of the best current accounts with interest on the market. There are no monthly fees, no minimum deposit requirements each month and the interest you can earn on your everyday balance is unlimited.
| Interest rate | Interest rate | Interest payable on balances up to | Requirements |
| Zopa Bank Biscuit account | 2% AER (1.98% gross) fixed for 12 months | No limit | None |
| Nationwide FlexDirect Current | 5% AER (4.89% gross) fixed for 12 months | £1,500 | Minimum £1,000 deposited each calendar month |
| Kroo Current Account | 3.15% AER (3.11% gross) variable | £500,000 | None |
| Bank of Scotland Current Account | 1.5% to 3% AER variable | £5,000 | Minimum £1,000 deposited each calendar month, balance kept above £0, and at least 2 Direct Debits paid out |
| Virgin Money M Plus Account | 1% AER variable | £1,000 | None |
Information accurate as of 1 July 2025. Accounts above chosen based on Which?’s ‘Best high-interest current accounts’. To be included in our table, accounts must not require a monthly fee.
What our experts say
“The current account with the highest interest rate isn’t always going to be the best match for your finances. A monthly fee may cost more than the interest you’d earn, while minimum deposit requirements might not be suitable if you don’t want to move your main bank account. It’s why we made Biscuit as accessible as possible. You can start earning interest straight away.”
What is a high-interest current account?
A high-interest current account is a current account with a competitive interest rate. This interest rate may even be comparable to those offered by savings accounts.
High-interest current accounts will normally come with a monthly fee, and other qualifying conditions, such as minimum account deposits.
What are the pros and cons of a high-interest current account?
Before signing up for a high-interest current account, it’s good to make sure you know exactly what you’re getting yourself into:
| Pros | Cons |
You’ll earn more interest than with a low-interest current account. | Monthly fees may cost more than the interest you’dearn, depending on your balance. |
| You may have easier access to your money in a high-interest current account thancertain savings accounts. | There is sometimes a limit onhow much interest you can earn. |
| High-interest current accounts can come with attractive switching rewards. | You may need to meet some kind of eligibility condition each month, such as a minimum deposit. |
| High-interest current accounts can come with additionalperks, such as subscriptions or cashback. | Earnings on high-interest current accounts aren'ttax free, unlike with a cashISA. |
Alternatives to high-interest current accounts
If a high-interest current account isn’t for you, there are a number of other options you can consider.
Free current account with interest
If the main thing you want from your account is everyday banking, then you could open a free current account that offers a lower rate of interest.
Easy-access savings account
An easy-access savings account allows you to take out your money at any time, without incurring a penalty, while still earning interest. They are also known as instant savings accounts, or flexible savings accounts. Easy-access savings accounts usually have lower interest rates than other types of savings accounts, but higher rates than free current accounts with interest.
Fixed-rate savings account
A fixed-rate savings account is suitable if you want to set a lump aside without needing to touch it. Over that time your money will earn interest at a fixed rate for the duration of your chosen term. Some accounts may not let you withdraw your money before the end of the fixed term, while others may charge a penalty fee. Fixed-rate savings accounts normally have higher interest rates than easy-access savers.
Individual Savings Account (ISA)
The biggest benefit of an ISA is that you can save up to £20,000 each tax year without paying tax on your interest. You can choose between variable and fixed rate cash ISAs (with different levels of easy-access), stocks and shares ISAs, and innovative finance ISAs. There are also lifetime ISAs, which have a maximum pay-in of £4,000 per tax year.
How to choose the best current account with interest
The best interest paying current account will differ depending on what you want and need from your account. You should look at more than just the interest rate itself.
Do you want a free current account with interest, or are you happy paying a monthly fee?
If you are happy to pay a monthly fee, will you earn enough interest to cover the cost?
Do you want to switch current accounts, or simply open a secondary account?
Are you able to meet any minimum deposit or Direct Debit requirements?
Do you want a bank that has branches or are you happy to go online-only?
What additional perks and benefits are on offer?
Open a free Biscuit bank account with high interest
Biscuit from Zopa offers 2% AER (1.98% gross), fixed for the first 12 months and variable after that. Plus, you’ll get access to our exclusive 7.10% AER (6.87% gross) savings pot, earn 2% cashback on eligible Direct Debits, and pay no fees when spending abroad.
It takes as little as 5 minutes to open an account. So what are you waiting for?
Learn more about Zopa's Biscuit bank account*AER stands for 'annual equivalent rate'. We pay you interest on a monthly basis, but AER shows you the rate you’d get if this monthly interest was compounded and paid once a year instead. We provide an AER to make it easier for you to compare our rates with other providers.
**We pay gross interest, which means nothing is deducted for tax.
FAQs
Is my current account interest rate fixed?
When you open a current account with interest, you’ll be told whether your interest rate is fixed for a set period of time, or whether you’re on a variable rate that could go up or down.
Are current account interest rates affected by the Bank of England?
High-interest current accounts are often influenced by the Bank of England base rate. If the base rate increases, current account interest rates may rise to stay competitive. If the base rate falls, current account interest rates may come down.
Can you open a joint current account with interest?
It’s possible to open a joint account that pays interest. But please be aware, Zopa doesn’t currently offer a joint account.
Why don't banks give interest on current accounts?
While there are banks that offer interest on current accounts, many don’t because current accounts are designed for everyday banking and immediate access, instead of saving and earning.
Can you have two current accounts?
Yes, you can have two current accounts. There’s actually no limit on the number of current accounts you can have. Just be aware that some banks may run a hard credit check when you open a new account, which can lower your credit rating.
What kind of bank account earns interest?
While current accounts that pay interest do exist, the most common kind of interest-earning bank account is a savings account.
Is my money safe if a bank goes bust?
If your bank goes out of business, and it was part of the Financial Services Compensation Scheme (FSCS), you’ll be automatically compensated for the money in your accounts with that institution, up to £85,000 per person. This means the maximum FSCS protection for the money in a joint account is £170,000. There can also be exceptions for temporary higher balances. Find out more here.
Is it safe to have more than £85,000 in a bank in the UK?
If you have more than £85,000 in savings, it may be sensible to spread these funds across accounts with different banks. This is because the FSCS only protects the first £85,000 across all your accounts at the same bank or building society.
Do I have to notify HMRC of any savings interest?
You’ll only need to contact HM Revenue and Customs (HMRC) about your savings interest if you’re self-employed and you exceed your Personal Savings Allowance. You’ll do so via your annual Self-Assessment tax return. If you’re employed, or receive a pension, HMRC will change your tax code so you pay the tax automatically.
Can I open a high-interest current account with a poor credit rating?
You may not be able to open a high-interest current account with a poor credit rating, as you’re likely to fail the bank’s credit check.
Can you easily withdraw money from a high-interest current account?
A high-interest current account works like any other current account. That means you can easily withdraw your money whenever you want, for free.
