Current account vs savings account: how to find the right fit for your finances
When it comes to opening a bank account, you’ll normally be choosing between two options: a current account or a savings account. But what’s the difference? And how do you know what’s the best option for your finances?
Most of the time, current accounts are used for everyday banking, while savings accounts are used to earn interest on your balance. But it’s not always as simple as that. Read on below to find out everything you need to know.
Current vs savings account: what's the difference?
The main differences between current accounts and savings accounts are:
| Current account | Savings account | |
| Use | Everyday banking, such as spending on your debit card and paying bills via Direct Debit or standing order. | A place to store a lump sum of money in the medium-to-long-term, that can be topped up with regular deposits. |
| Access | Instant access, including withdrawing money from a cash point and transferring funds between accounts. | Easy access savings accounts let you withdraw money without a fee. Fixed accounts may have withdrawal limits or penalties. |
| Interest | Most free current accounts don’t offer interest on your balance – though Biscuit from Zopa does.You can, however, find current accounts with monthly fees offering interest rates that rival savings accounts. | Every savings account will offer interest, as earning money on your balance is the main feature of this type of account. |
| Overdrafts | It ispossible to get an overdraft with somecurrent accounts(Zopa doest notcurrently offer one).However, you may need to apply and meet eligibility requirements. | As you are notable to spend from asavings account, theydon’toffer overdrafts. |
| Fees | Manycurrent accounts do nothave monthly fees. Those that do normally offer additionalbenefits. However, there can be fees, such as foreign exchange fees. | Savings accounts do nottend tohave monthly fees, butmay come with some withdrawal penalties. |
| Credit score | Using a current account to pay bills, or responsibly manage an overdraft, can help you build your credit score.But failure to repay an overdraft or opening too many accounts ina short periodcould harm your score. </span></span> | Opening a savings account typically will not help you build your credit score. |
Do you earn interest with a current account or savings account?
You’ll normally earn interest on a savings account – it’s the main reason to open one. The interest rate will vary by bank, as well as the type of savings account. For example, easy access savings accounts, such as Zopa’s Smart Saver Access pots, may offer a lower rate of interest than a fixed rate savings account.
Interest on current accounts is less common, and mainly available with paid-for accounts. However, with a free-to-open Biscuit current account, you’ll get 2% AER* (1.98% gross) on your balance, with no limits to how much you can earn.
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.
Which account is best for saving money?
For most people, a savings account is likely to be the better place to grow your money, especially if you’re setting aside a lump sum which you’re not going to need to spend. But there are times when saving in a current account can make more sense.
Whichever option you choose for your money, some savings accounts and current accounts come with introductory offers that expire after a given period. Therefore, it’s always best to keep track of whether your account is still giving you the best value possible.
When should you grow your money in a current account?
You don’t always need a savings account to earn interest. Some current accounts like Biscuit from Zopa pay interest on your everyday balance, so your money works harder without being locked away.
Many high-interest current accounts come with fees or eligibility requirements. You’d need to weigh up the cost of those accounts against the best available savings rates when deciding which to open. Biscuit, for example, has no monthly fee and no minimum deposit.
When should you use a savings account?
If you have a lump sum you can comfortably set aside for the medium-to-long-term, then a savings account will likely be more appropriate than a current account.
There are four main types of savings account, each suited to different needs:
Easy access accounts typically come with lower interest rates than fixed term accounts, in exchange for the ability to withdraw money whenever you want without paying a penalty.
Fixed term accounts normally offer a higher rate of interest than easy access accounts, fixed for a set period of time. However, you won’t be able to withdraw money from your account during that period without paying a penalty fee.
Individual Savings Accounts (ISA) allow you to save without paying any interest on your earnings. However, there’s a limit on how much you can save each tax year, in 2025/26, that limit is £20,000.
Notice accounts usually offer a higher interest rate than easy access accounts, but you’ll need to give advance notice before making a withdrawal—typically between 30 and 120 days. If you take money out without giving the required notice, you may be charged a penalty.
What is your Personal Savings Allowance?
Your Personal Savings Allowance (PSA) is the amount of interest you can earn on your savings in a year without being charged tax.
If you’re a basic rate taxpayer, your allowance is £1,000 a year.
If you’re a higher rate taxpayer, your allowance is £500 a year.
If you’re an additional rate taxpayer your allowance is £0 a year.
If you’re going to earn more than your allowance in a year, you could consider putting up to £20,000 of your savings in an ISA. Any interest earned on the sum in your ISA is tax-free, and doesn’t count towards your allowance.
Can you use your savings account as a current account?
While you can use current accounts that pay interest on your balance as savings accounts, it doesn’t really work the other way around. This is because savings accounts aren’t designed for everyday banking.
Bills: you can’t set up Direct Debits and standing orders from a savings account, meaning you wouldn’t be able to pay your bills.
Salary/pension: some savings accounts will have a limit on how much you can deposit each month. This means you wouldn’t be able to have your salary or pension paid into a savings account. You may also only be able to pay into a savings account from a current account held with the same provider.
Spending: savings accounts don’t come with debit cards, so you wouldn’t be able to spend directly from your account.
Withdrawals: Some savings accounts limit the number of withdrawals you can make each year, which would seriously hamper your access to cash if you tried to use it as your everyday bank account.
Is it better to keep money in a current account or savings account?
You don’t have to choose one. Many people use a current account for their day-to-day spending and a savings account for money they want to set aside. Whether it’s better to keep your money in one or the other depends on what you need it for:
| Keep your money in a current account if: | Keep your money in a savings account if: |
| You need to use your funds for everyday expenses, such as paying bills and spending in-store and online. | Your main aim is long-term saving. |
| You want immediate access to your cash. | You do not want or need to touch your money in the short-term (though this is possible with easy access savings accounts). |
FAQs
How much money should I keep in my current account in the UK?
How much you keep in your current account depends on your spending habits and how you manage your money. At a minimum, it’s sensible to keep enough to cover regular bills, upcoming payments, and a small buffer for unexpected costs.
It’s also worth knowing that the Financial Services Compensation Scheme (FSCS) protects up to £85,000 per person, per bank. Any amount above that may not be covered if your bank were to go bust.
Is it smart to keep money in savings?
It can be a smart decision to keep money in a savings account, as it allows you to earn interest on your balance. However, since some savings accounts come with withdrawal limits, you should always make sure you have enough money in your current account to cover your everyday finances, plus emergencies.
Why is an ISA better than a savings account?
An ISA can be better than other types of savings accounts because it allows you to earn tax-free interest on up to £20,000 each tax year. However, you need to make sure you don’t go over that £20,000 limit.
What are the disadvantages of a current account?
Current accounts are built for everyday banking, so so they don’t normally provide the same benefits as savings accounts when it comes to growing your money. They typically offer lower interest rates or may charge monthly fees if they come with higher-interest features.
However, not all current accounts follow this pattern. Biscuit from Zopa, for instance, pays interest on your balance and gives you access to a high-interest Regular Saver pot, without charging a monthly fee or requiring a minimum deposit.
What are the disadvantages of a savings account?
Savings accounts are designed for longer-term goals, which means they’re less flexible for everyday spending. For instance, you can’t usually use a savings account to pay bills or spend directly with a debit card.
