The move means Starling Bank customers have just days in which to switch accounts if they want to continue to earn interest on their current account balance.
Starling Bank’s joint and personal current accounts currently pay 3.25% AER on balances up to £5,000. This means that a customer with the maximum amount in their account could earn £162.50 per year in interest.
But from Monday, new and existing customers will no longer earn any interest at all. The app-only bank informed customers about the change in December via messages in the banking app. Other perks offered by the current account, including fee-free spending abroad, will remain.
Alastair Douglas, CEO of TotallyMoney, said: “Starling regularly tops the polls for being one of the best British banks, and has seen consistent growth in the current account market, with 3.6 million customers now holding £11bn in deposits. However, from Monday, the bank will be scrapping interest payments on personal and joint current accounts. This means you should move your money, or see your buying power reduced as a result of inflation.
“The good news for die-hard Starling fans is that the bank has launched an Easy Saver, which gives customers unlimited access to their funds, with an interest rate of 4% AER on up to £1m. That way, you can still use the Starling account day to day, but that you’ll just have to be a bit more savvy when it comes to moving your money between accounts to get the most out of the bank.
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“Another option could be to move your savings elsewhere. If you’re thinking about doing this, then it’s worth weighing up all your options, including setting up an ISA, finding a fixed-term account, or a notice savings account. However, the easiest option might just be to find another easy-access savings account, so you can withdraw whenever you like — and there’s a handful currently offering inflation-busting interest rates. Just remember that loyalty doesn’t pay, but moving your money can.”
Banks that pay interest on current accounts
If you still want to earn interest on your current account balance, there are several accounts worth considering.
Nationwide’s FlexDirect account pays 5% AER on balances up to £1,500 for the first 12 months you hold the account.
Kroo Bank’s current account pays 3.65% AER. But this is a tracker rate at 1.1% below the Bank of England base rate – so it will fall if the bank cuts rates later today as expected.
Santander’s Edge Up pays 3% AER on balances up to £25,000.
Lloyds’ Club range of current accounts pay 1.5% AER interest on balances up to £3,999 and 3% on balances from £4,000 to £5,000, but zero interest on balances above £5,000.
