We spend plenty of time being told to check the interest rate on our savings, but there is another pot of money that is remarkably easy to forget about: the cash sitting in our everyday current account. If you routinely keep a few thousand pounds there to cover bills, unexpected expenses or simply to give yourself a financial cushion, it is worth asking whether that money could be doing a little more for you.
Produced in partnership with Kroo.
Most of us have become fairly accustomed to shopping around when it comes to our finances, whether that means comparing energy tariffs, checking insurance renewal prices or moving savings when an introductory rate disappears, but there is one account that can very easily escape the same scrutiny.
Your current account is, after all, mostly functional. It’s where your salary arrives, where the mortgage or rent comes out and where direct debits, providers may have their own fees. You’ll get Visa’s exchange rate, with no markup from Kroo.
Other Kroo products: Customers can also apply separately for a Kroo Flexible Cash ISA and personal loans, subject to eligibility and their respective terms.
Eligibility: UK residents only. 18+. Ts&Cs apply.
The ability to keep your existing bank could be the interesting bit
This is one of the features I think is easiest to overlook because bank promotions so often revolve around persuading us to switch.
Kroo isn’t part of the Current Account Switch Guarantee, but you don’t have to close or move your existing account to open one, so you could keep your salary, mortgage, direct debits and other everyday arrangements exactly where they are.
For someone who is perfectly happy with their existing bank but has several thousand pounds of surplus cash sitting in a current account that may pay little or no interest, that creates a different proposition from the usual “move everything to us” banking offer.
You are, of course, adding another account to your financial life, which won’t appeal to everybody, but if the alternative is repeatedly shifting money backwards and forwards between accounts, some people may find keeping a separate pot of accessible cash easier to manage.
No monthly account fee – but always look for the other costs
Kroo doesn’t charge a monthly account fee for its current account, which is worth highlighting because an interest-paying account becomes rather less attractive if the benefit is being swallowed up by a regular account charge.
That doesn’t mean you should assume that every possible banking transaction everywhere will cost nothing, however, and this is where reading the terms matters.
It’s one of the reasons I prefer looking at the whole account rather than simply comparing headline interest rates. An account needs to fit the way you actually use your money, rather than looking fantastic in a comparison table and becoming irritating once you’ve opened it.
The budgeting tools could help separate your ‘spare’ money
One of the difficulties with keeping a large balance in a current account is that seeing £5,000 sitting there can create the illusion that you have £5,000 available to spend, when in reality £1,000 might be for an upcoming holiday, £1,500 is your emergency fund and another chunk is earmarked for a large annual bill.
How Kroo’s money tools work
Kroo’s Pots allow customers to ring-fence money for different purposes, while its real-time spending insights are designed to help you see where your money is going.
There are also shared-spending tools which allow customers to track, split and settle expenses with other people, something that could be useful for couples, housemates, holidays or anyone who regularly finds themselves working out who paid for dinner three weeks ago.
I wouldn’t open a bank account simply because it has budgeting tools, but if you’re trying to make the money sitting in your current account work harder while also keeping it organised, they are useful features to have.
What about using Kroo abroad?
If you travel regularly, overseas spending is another part of a current account worth checking because foreign transaction fees can quickly undo some of the money you’ve made elsewhere.
When you use your Kroo card abroad, Kroo won’t add any extra fees for transactions or ATM withdrawals. It’s important to know that while Kroo don’t charge, some individual ATM providers may have their own fees. You’ll get Visa’s exchange rate, with no markup from Kroo.
Whenever you’re using an ATM abroad, check the information displayed before accepting the transaction so you know whether the machine’s operator is adding a fee.
What about the 12-month bonus?
This is one of the most important things to understand before being attracted by the 3.00% AER / 2.96% gross (variable) figure.
Important: Check the rate after 12 months
The current 3.00% AER / 2.96% gross (variable) rate includes a fixed 2.00% AER promotional bonus for the first 12 months, so this isn’t an account I would open and then forget about indefinitely.
The remaining element is variable, and rates can change, which means I’d put a reminder in my calendar before the promotional period ends and compare what
<p>Existing customers can also apply separately for a Kroo Flexible Cash ISA, while Kroo offers personal loans to eligible customers.
These are separate financial products with their own terms and eligibility requirements, so the fact you have a Kroo current account doesn’t automatically mean either will be the best option for you. If you’re saving, compare ISA and savings rates across the market, and if you’re considering borrowing, compare the interest rate and total cost with other available options before applying.
That distinction is important because convenience is useful, but it shouldn’t replace shopping around.
Is my money protected with Kroo?
This is a question worth asking before depositing a substantial amount with any bank, particularly one you may not have used before.
FSCS protection: Up to £120,000
Kroo Bank Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, while eligible customer deposits are protected by the Financial Services Compensation Scheme (FSCS), up to £120,000 per eligible customer, subject to the applicable protection rules.
It’s also worth remembering that the maximum balance on which a bank will pay interest and the amount covered by deposit protection aren’t necessarily the same thing, so anyone considering holding a particularly large balance should check the latest FSCS protection rules before moving their money.
For more information, read MoneyMagpie’s guide to managing your money and protecting your savings.
Do you pay tax on current account interest?
Potentially, although many people can earn some savings interest without paying tax on it thanks to the Personal Savings Allowance.
Interest earned on money held in bank accounts can count towards your savings income for tax purposes, so if you already have substantial savings elsewhere it’s worth considering the total interest you’re earning across all your accounts rather than treating each one in isolation.
Cash ISAs work differently because interest earned within an ISA is tax-free, which is another reason somebody with a large amount of cash shouldn’t automatically choose a current account simply because it advertises an attractive rate.
Your circumstances matter, and the best home for £5,000 of readily accessible money won’t necessarily be the best home for £50,000 of longer-term savings.
The five-minute current account check I’d do today
Before you start moving money anywhere, spend five minutes looking at your current account and work out roughly how much you normally keep there once your regular bills have been accounted for, then find out what interest rate – if any – you’re currently receiving.
If you’re routinely keeping several thousand pounds in an account that may pay little or no interest, compare your options and think about whether some of it belongs in an easy-access savings account, whether an interest-paying current account such as Kroo might suit you, or whether a combination of the two makes more sense.
There is no point making your finances unnecessarily complicated for the sake of earning a handful of pounds, and an attractive headline rate shouldn’t persuade you to open an account that doesn’t fit the way you actually manage your money.
However, if you’ve spent the past year carefully comparing savings rates while £5,000 has been sitting quietly in your current account that may pay little or no interest, that feels like a financial blind spot worth investigating.
We spend an enormous amount of time looking for clever new ways to save or make money, but occasionally the easiest wins come from looking at the money we already have and asking one very simple question: could this be working harder?
Could your everyday money be working harder?
Explore Kroo’s interest-paying current account, including the promotional rate, budgeting features and eligibility requirements, before deciding whether it suits you.
