The top five current accounts

If you've never switched current accounts, it's likely you're earning next to nothing on your cash. Here are the top five current accounts if you want a better return on your cash.

I think everyone is entitled to a good current account, with a decent rate of interest. Considering most of us put all the money we ever earn in there every month, I don't think it's too much to ask, is it?

The trouble is, recent research suggests the majority of us are getting taken for a ride by our current account providers.

A survey last week by Moneyfacts found that half of all credit accounts are currently paying no interest on savers' money. Nada. Zilch. Diddly squat. Not a penny.

In fact, a whopping 83% of current accounts are paying 0.1% or less, up from 57% last August.

Now I know Bank Base Rate is moored at record low levels, and is likely to stay there for a while, but that's disgraceful! Thankfully, there are still accounts out there that will pay you a decent return on your money.

1) Alliance & Leicester Premier Direct - pays 6% & gives 0% overdraft

The Alliance & Leicester Premier Direct current account is my favourite in the market, paying as it does a whopping 6% AER fixed on balances up to £2,500.

The account even offers 0% on arranged overdrafts for a whole year, while you only need to pay in a minimum of £500 each month. That sounds pretty good to me.

You have to switch all your direct debits to qualify for the account, and the interest rate will drop to 1% after a year. And you'll only earn 0.1% on balances above £2,500.

2) Lloyds Vantage - pays 4% on balances of £5,000 to £7,000

Another good option, if you keep large amounts in your current account, is the Lloyds TSB current account with Vantage.

The higher the balance of your account, the more interest you earn. For sums over £3,000 you will get 3% AER, while those of you lucky enough to have a balance of between £5,000 and £7,000 will get 4%.

So, if you regularly have more than £2,500 in your current account, this account could offer you a better return than Alliance & Leicester, even though the Alliance & Leicester account pays a higher rate. 

That's why it's a good idea to work out how much your average current account balance is thoughout the year, and do your sums before you switch.

3) Abbey Current Account - pays 6% & offers linked savings account at 6%

Like Alliance & Leicester, this Abbey account also pays 6% on balances up to £2,500. However, you must pay in at least £1,000 into the account each month and it is nowhere near as attractive as the Alliance & Leicester account on the overdraft side.

It offers just a £50 interest-free overdraft buffer (charging almost 20% in interest on larger overdrafts to boot). So it's not a good account for you if you're planning to go overdrawn.

However, the Abbey Current Account does come into its own if you have savings. If you switch to this account, using the Account Transfer Service, you can open a Super Fixed Rate Monthly Saver, also paying 6% AER (fixed) for 12 months. You'll need to save between £20 and £250 a month, and no withdrawals are allowed. If you miss a payment, the rate drops to 0.1% AER for that month.

Still, if you are prepared to follow all these rules, this account will suit you. Just be aware that Abbey was recently voted Britain's Worst Bank in a lovemoney.com survey of 700 readers, mainly due to its allegedly terrible customer service!

4) Alliance & Leicester Premier 21 - best for 18-21 year-olds

Moving swiftly on, Santander does offer a brilliant current account just for youngsters - the Alliance & Leicester Premier 21 current account.

Only available to customers between the ages of 18 and 20, this account pays 5% on your money, as well as offering a 12 month interest-free overdraft.

This strikes me as a better deal than most of the specialist student accounts (which you can read about in How to choose the right student bank account). So if you meet the age requirements, or perhaps your child does, I'd give this account a proper look.

5) Halifax Reward - pays £5 a month

The Halifax Reward account is at the other end of the scale, paying 0% in interest, but giving you £5 every month you pay in £1,000!

The £5 credit is a straightforward after-tax benefit for basic rate taxpayers, as Halifax will pay £1.25 per month (20% of £6.25) on their behalf to HM Revenue & Customs. Non-taxpayers can claim this back, and get an extra £15 a year.

So how does this account stack up against the rest? If you maintain a balance of £1,000 throughout the year, basic-rate taxpayers will effectively get 6% return (£60) - so the same as the Alliance & Leicester and Abbey accounts. But if your typical balance throughout the month is higher than £1,000, then you're better off with an account paying a higher rate of interest.

Of course, there's nothing to stop you paying £1,000 in - and then immediately moving it immediately to a higher-interest current account (or savings account). That way, you'll earn £60 a year for an empty current account. Talk about easy money...

Just be careful to set up your standing orders a few days apart as if you go overdrawn on this account, you'll be charged £1 a day.

Changing current account is easy to do!

There has long been a perception that changing current account provider is a bit tricky. After all, you have all those direct debits and things to sort out.

Thankfully, this perception is completely wrong. Your new bank should take over everything in terms of setting up the new direct debits and standing orders, so once you've made that decision about which account to switch to, it should all be plain sailing!

Which is the best?

The beady-eyed eyed among you will have noticed that three of the top five current accounts mentioned above are offered by the same banking giant: Santander, which owns Alliance & Leicester and Abbey.

If you're looking for a good return on your money, I reckon the best deals for you will almost inevitably be offered by either Abbey or Alilance & Leicester.

They have really thrown down the gauntlet, but again, a note of caution: Abbey did come bottom in our survey of Britain's worst bank. In contrast, one current account which pays very little interest - the First Direct 1st Account - came out with glowing reviews. A whopping 93% of you said it was either 'excellent' or 'good' in terms of customer service. And right now, you get £100 just for signing up, which can't be bad!

Remember, getting the best rate does not mean you will get the best service!

More: The best savings accounts for regular savers | The vicious current account trap