Are you looking for a current account that not only allows you to handle your bills and everyday spending, but also pays you a little bit of interest on your money? Current account interest rates are usually very low, or even non-existent, but there is one account that offers an incredible 5% interest. That figure is more than twice as much as is paid on most savings account!

Meet the Nationwide FlexDirect Account

The account in question is the Nationwide FlexDirect account, which launched in late 2012 and began offering an interest rate well above the market average in March 2013. If you already have a Nationwide FlexAccount, then converting to the new FlexDirect is easy - simply make the request online using your usual online banking system and your account will be switched over within a few days, keeping the same account number and sort code. FlexDirect is also open to new customers, who can apply online, by phone, or in a Nationwide branch.

Too Good to Be True?

Perhaps five percent interest strikes you as sounding just a little too good to be true? Well, it must be said that there are a few limitations. The headline rate of 5% is only paid on the first £2,500 in the account; any additional balance over that amount earns no interest at all. If you are disappointed after reading that fact, remember that 5% interest on £2,500 still nets you £125 in one year, so the return is almost certainly worth the few minutes that you spend setting up the account.

The other bad news is that the five percent rate is an introductory rate; it only lasts for the first 12 months. After the first year, the interest rate drops to an unremarkable 1%. However, by that time smart savers will already have found a new high-paying account to move their money into.

What You Need to Do to Earn Interest on a FlexDirect Account

There is just a single requirement to keep your account eligible for 5% interest: keep paying at least £1,000 into the account each month. The money must come from an external source, such as an account held by another bank. Having your salary paid into your FlexDirect account is an easy way to meet this requirement.

The money you take out of the account has no impact on your eligibility for interest payments, so you can move the £1,000 that you are required to pay in straight back out again if you only want to use the FlexDirect as a source of interest rather than as your main current account. You also get a Visa debit card with the account, which you can use to withdraw cash for free from Nationwide and Link cash machines, or to spend money in shops and restaurants via a chip and PIN payment.

An Added Benefit for Nationwide FlexDirect Customers

There is one more benefit that you gain when you open a FlexDirect account. Nationwide customers with one of these accounts are eligible to apply for a Flexclusive ISA, which pays 2% interest on savings up to £5,760. Sure, 2% is not as impressive as the 5% you're getting on your FlexDirect current account, but the big advantage of an ISA is that all the interest earned on this type of account is completely tax free.

The Verdict

Despite its limitations, the FlexDirect account still beats most other current accounts in terms of the interest it pays. If you are looking for current account interest rates that reward you for storing a larger amount of money, then the Santander 123 account is likely to be a better option, as this account pays interest on balances of up to £20,000. However, the Santander 123 account does come with a monthly fee, so it is probably not worth it if you only have a small amount of money to store and spend.