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Revolut launches first savings account, but there’s a catch

Paloma Kubiak
Written By:
Paloma Kubiak

Revolut has entered the UK savings market and has launched an easy access account paying a competitive 1.35%. But to get the deal, you need to be a paying member.

The challenger bank which started out offering FX and pre-paid cards for travellers, has partnered with Flagstone and Paragon Bank to carve its way into the savings market.

It’s launched a competitive 1.35% AER interest rate on its easy access Savings Vault (spare change round-up feature). There’s no minimum deposit amount (maximum is £85,000), customers can withdraw their money at any time penalty-free and interest is paid daily.

But this exclusive rate is only available to Revolut Metal customers who pay £12.99 a month for a range of perks in the UK and overseas, such as medical insurance, free IBAN account and up to 1% cashback on card payments.

Revolut said it has a limit on how many accounts can be opened but wouldn’t provide further details on this. It did say that after this limit has been reached, customers will receive a lower rate. Standard (no monthly fee) and premium (£6.99/month) customers will also be able to access Savings Vaults at a lower rate in the coming months.

Funds in Savings Vaults are deposited with Paragon Bank and are protected by the FSCS up to an £85,000 limit. However, if you are a customer of both Paragon Bank and Revolut, only the first £85,000 is protected.

As this is a variable rate, Revolut says it will give customers reasonable notice if the interest rate is going to go down.

How good is this?

Andrew Hagger of independent MoneyComms, said to earn £12.99 per month on a savings account paying 1.35%, you would need a balance of £11,500.

“It is the joint second highest paying easy access savings account. Gatehouse Bank pays 1.40% on a minimum £1,000, with Saga and Marcus paying 1.35% but without being part of a bundled package.

“The packaging of savings accounts in with other financial benefits could become a more frequently used marketing ploy. While people are prepared to shell out a fixed monthly fee for the likes of Netflix and music streaming services such as Spotify, I think it will be more difficult to convince consumers that a financial services package represents value. It will depend on individual circumstances and the perceived value a person sees in the benefits being offered.”

Earlier this month, digital challenger Tandem unveiled a £6 a month charge on its previously free 0.5% cashback credit card with the added benefit of a market-leading 1.5% savings rate.

The offer was met with criticism from customers and analysts as better cashback rates were available elsewhere and for free.

‘Providing greater value than traditional banks’

Nik Storonsky, founder & CEO of Revolut, said: “Interest rates have been minuscule in recent years, and this has directly impacted the options that people have when it comes to saving money. With the introduction of Savings Vaults, we can now offer our UK customers one of the most competitive rates in the country, with complete flexibility and protection.

“For us, this is another step towards our goal of democratising the financial services industry, and providing much greater value than traditional banks. As we push into 2020, we have a host of new products and services on the way that will help our customers to spend, save and manage their money more effectively.”