Financial experts suggest that keeping more than £1,000 in a current account could mean losing money, as most accounts pay no interest and fail to keep pace with inflation.
Recent data shows that 6.4 million current accounts in the UK hold £10,000 or more, with that money earning no interest. Only 0.04% of current accounts beat inflation by earning 4% or over, meaning the value of money in most accounts drops over time.
What is the ideal balance to keep?
Derek Sprawling, head of money at Spring, who is behind this data, told Metro: “A current account should be seen as a tool for everyday spending, not a place to store large sums of money long-term.”
He added: “Think of your current account as your digital wallet – designed for convenience, not storage. You wouldn’t carry £2,500 in cash to the supermarket, so why leave it idle in a current account? Treat it as a flow-through space for your money, not a destination.”
Sprawling recommends keeping between £500 and £1,000 in a current account, which he describes as a sensible amount to cover regular bills and a buffer for unexpected expenses.
How inflation affects your money
Inflation refers to a general rise in the level of prices. With inflation currently at 3.5%, £10,000 held in a no-interest current account could lose around £350 in real value over a year.
“That’s the hidden cost of inaction. If your money isn’t earning at least the rate of inflation, it’s effectively shrinking. Switching to accounts offering higher returns is key to preserving purchasing power,” Sprawling said.
He encouraged savers to “shop around and find the best rate that works for you but also take into account your needs,” adding: “If you want an account that enables you to access your funds within minutes, not days, do your research and check the Terms and Conditions of different accounts; not all ‘easy access’ is as easy as you might presume.”
Choosing the right account
When selecting a current account, it’s important to look at other perks, such as a sign-up gift, 0% overdraft, insurance, or deals on cinema tickets. Martin Lewis’s consumer finance site, Money Saving Expert, advises: “Decide which of these is most important to you. Check the account’s eligibility criteria before applying, too. Certain accounts come with fees, or require you to pay in a certain amount each month to qualify for the features they offer. Others may need you to have a good credit score, so do check the small print before you apply.”
The four best no-fee current accounts for new switchers, according to Money Saving Expert, include Santander Edge, First Direct 1st Account, Nationwide FlexDirect, and Co-op Bank.
For those who want flexibility, there are savings accounts that allow unlimited withdrawals, though comparing options is necessary to find the best one. Sprawling also recommends a weekly review of the money in a current account, noting: “Weekly budgeting works well for many people – it helps maintain control and prevents overspending.”
“Topping up your current account in line with your spending habits ensures you’re not leaving large sums exposed to inflation. The key is to be intentional: know what you need, keep that amount accessible, and move the rest to an account that rewards you for saving,” he said.
