Nationwide has launched a new offer of 5% interest on current account cash.

The building society has ratcheted up its interest rate on the FlexDirect current account to entice more customers through its doors.

The increase takes interest on the current account from 2% to 5%. However, the rate is only available for up to £1,500 for 12 months. At the end of the 12 months the rate falls to 0.25% AER.

You’ll also have to pay in at least £1,000 a month. Anyone who doesn’t already have a current account with Nationwide can switch using the Current Account Switching Service (CASS) and will receive a £100 bonus for doing so.

This combined with the interest will earn you £200 over 12 months with the account.

Best place for cash?

The Nationwide account will only take care of a small amount of money for you and isn’t practical for anything like larger savings amounts.

That being said, with the Bank of England hiking interest rates, cash is becoming more attractive.

The top rate on an easy access cash ISA is with Marcus by Goldman Sachs offering 1.3%. This is however still lower than the 1.5% rate that Marcus offered when it first launched in 2018.

For a one-year fixed cash ISA you can get 1.6% from Aldermore, two years 2.45% from Charter Savings Bank, or for five years 2.6% from Hampshire Trust Bank.

These rates are moving up regularly with the base rate rising but are still well behind the current level of inflation, which stands at 9.1% on the Consumer Prices Index (CPI) measure from the Office for National Statistics (ONS).

Is cash king yet?

With investment markets struggling this year it may be tempting to assign more wealth to cash, but ultimately this is still dooming money to devaluation, with such a big discrepancy between rates on offer and inflation levels.

The reality is that investments are still the best long-term method for growing wealth.

Cash is useful for an emergency fund. Holding some cash is also useful if you rely on wealth for your income, as having a pot of cash to draw upon in the short term is a good way of preventing the crystallisation of losses when markets are down.

But beyond this, cash really isn’t yet king. In fact, interest rate rises have a long way to run before cash savings become a viable method of storing long-term wealth again.

Note all rates quoted correct at the time of writing but subject to change.