Chip is a digital challenger founded in 2017 and to date, half a million app users save and invest with the fintech firm. 

While it isn’t a bank, it has offered savers market-leading returns on the Chip Instant Access Account.

However, now, Chip has made a big change to its returns, both in terms of protection for savers and another increase cementing its place in the best buy tables.

Bonus rate to interest rate

Money deposited into the fee-free Chip Instant Access Account is held by the UK authorised bank, ClearBank.

This means eligible deposits are protected under the Financial Services Compensation Scheme (FSCS) up to £85,000. 

However, the return was paid as a bonus which meant it wasn’t treated in the same way as money deposited into the Chip Instant Access Account.

This bonus sum wasn’t protected under the FSCS, it didn’t compound and could only be withdrawn once your full cash balance had been withdrawn.

But now Chip has moved away from offering savers a bonus return, and instead pays interest. And this rate has increased to 3.05% AER (variable).

The major boon of this switch is that both the customer deposit and the interest is now protected under the FSCS – up to £85,000 (subject to eligibility).

Customers also benefit from monthly compound interest – earning interest on their interest – something which wasn’t possible under the previous bonus return model. 

Further, savers can now withdraw the interest at any time, and can set up autosaves as well as ‘goals’ for savings. 

Competitive interest rate

The 3.05% AER rate takes the Chip Instant Access Account into the best buy tables as it aims to keep up with the Bank of England base rate. 

As it aims to follow the BofE’s rate, savers don’t actively have to move their cash around chasing the best rate as Chip aims to reward you faster than the banks.  

By comparison, the traditional banking giants pay an average rate of just 0.8%, and they have been criticised for the lag in raising rates for savers off the back of the consecutive BofE base rate hikes. 

New savers can download the Chip app from the App Store or Google Play Store, or by scanning the QR code from the website and they can start with a minimum of £1 to £250,000 in the Chip Instant Access Account.  

Meanwhile for existing customers, the switch from bonus to interest has happened automatically. However, savers will not earn interest on any bonus already accrued and past bonus payments will not be automatically converted to an interest payment.