Earning more from your current account

Fool.co.uk reviews the best high-interest current accounts: We are often advised not to leave huge amounts of money in our current accounts. That's because any interest we earn there can be miniscule.

However, that is no longer the case thanks to a new class of current accounts that pay interest that rival savings accounts. But before you transfer your stash into a high-interest current account, it's worth noting they generally have strings attached.

Currently, there are 136 interest-paying current accounts and 13 pay over 5% interest a year. Alliance & Leicester Premier Direct is especially eye-popping because it pays an Annual Equivalent Rate (AER) of 8.5% that is fixed for a year. Interest is credited monthly. But the rate is only offered on balances of up to £2,500. For amounts over this, the rate plummets to 0.1%

The Abbey Current Account pays 8% (AER) if you switch from another provider. But the advertised rate is restricted to balances below £2,500 only. Above this, it drops to 2.5% (AER), though this rate applies to balances of up to £2m. Lloyds TSB Classic Plus is another standout current account. It pays 6% (AER) on balances of up to £2,500. However, you must pay in at least £1,000 a month.

Coventry Building Society's First Account pays interest at 5.6% (AER) on balances of up to £250,000. But you must deposit at least £1,000 a month. Meanwhile, Halifax High Interest Current Account limits its 5.12% (AER) interest rate to balances of up to £2,500. You have to pay in £1,000 a month to qualify.

David Kuo, Head of Personal Finance at money website Fool.co.uk, says: "The new breed of high-interest current accounts has blown a gust of fresh air into an otherwise stale and complacent banking sector.

"Some of the rates on offer are indeed better than those available in savings accounts. But there are catches to beware of.

"Banks like to dangle big juicy carrots in front of us to get us to switch. But carrots can quickly turn into unpalatable turnips if you don't dig deep into the terms and conditions."