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TSB cuts current account interest from 5% to 3%: your options
TSB is cutting the interest rate on its popular Classic Plus current account from 5% to 3% from 2 July.
It means account holders will be able to earn up to £45 a year in interest on balances up to £1,500 instead of a maximum of £75.
The challenger bank increased the rate of interest back to 5% last year as a sweetener to customers, following its huge IT meltdown which left millions locked out of their accounts.
Back in January 2017, it cut the rate from 5% on balances up to £2,000, to 3% on balances up to £1,500.
To qualify for the interest, customers must pay in at least £500 a month and have registered for internet banking and paperless statements.
To entice customers to stay, the bank today also announced a switching deal which offers £75 to any current account customer who ‘refers a friend’ and who subsequently switches from their existing bank account to either TSB’s Classic or Classic Plus Current Account.
Existing TSB current account customers can refer up to five friends – earning them up to £375 if all five friends switch. Friends who have been referred and switch their bank account to TSB will also receive £75.
I’m a TSB current account customer: should I switch?
The TSB rate will be reduced on 2 July, so you still have a few months to take advantage of the 5% interest.
Nationwide FlexDirect is the only other 5% AER current account deal on the market. The rate is paid on balances up to £2,500 but it drops to just 1% after 12 months.
To take advantage of this deal, you’ll need to pay in a £1,000 a month but it’s worth diarising when a year is up to see whether it’s worth switching.
Nationwide FlexPlus pays 3% AER on balances up to £2,500 but this account comes with a monthly fee of £13.
After that, the best you can do is 1.5% AER from a host of banks including Santander, Bank of Scotland and Lloyds.
Tom Adams, head of research at independent savings advice site Savings Champion, said: “This news will clearly come as a blow to customers, but the rate was at least maintained for a longer period than many of TSB’s rivals and holds its own in today’s market. Paying double the rate available from Lloyds, Santander and Bank of Scotland, the account still represents a better prospect than some.”
Best high interest current accounts
| Provider | Account name | Maximum deposit | Gross | AER | Monthly fee | Account summary |
|---|---|---|---|---|---|---|
| Nationwide Building Society | FlexDirect Account | £2,500 | 4.89% | 5.00% | – | Easy access. Rate includes a conditional bonus for the first 12 months, subject to a minimum of £1,000 deposited per month. After the first 12 months, or if this condition is not met, the rate will reduce to 1.00%. The 4.89% gross / 5.00% AER interest rate is only paid on balances up to £2,500. Balances above £2,500 will not receive any interest. Interest is paid on the 1st of each month. |
| TSB Bank | Classic Plus account | £1,500 | 4.89% | 5.00% | – | Easy access. The 4.89% gross / 5.00% AER interest rate is only paid on balances up to £1,500. Balances above £1,500 will not receive any interest. A minimum of £500 must be paid in to the account each month and you must register for internet banking, paperless statements and correspondence (when available) to qualify for this interest rate. Interest is paid monthly. Rate will be 2.96% gross/3.00% AER from 2 July 2019. |
| Nationwide Building Society | FlexPlus Account | £2,500 | 2.96% | 3.00% | £13.00 | Easy access. The 2.96% gross / 3.00% AER interest rate is only paid on balances up to £2,500. Balances above £2,500 will not receive any interest. This account also has a monthly account fee of £13 and additional benefits. Interest is paid monthly. |
| Santander | 1|2|3 Current Account | £20,000 | 1.49% | 1.50% | £5.00 | Easy access. A minimum of at least £500 must be paid into the account each month and pay at least two different Direct Debits from your account each calendar month to qualify for this interest rate. This account also has a monthly account fee of £5 and additional benefits. The 1.49% gross / 1.50% AER interest rate is only paid on balances up to £20,000. Balances above £20,000 will not receive any interest. Interest is paid monthly. |
| Bank of Scotland | Vantage Current Account | £5,000 | 1.49% | 1.50% | – | Easy access. A minimum of £1,000 must be paid into the account each month, you must stay in credit and pay at least two different Direct Debits from your account each calendar month to qualify for this interest rate. The 1.49% gross / 1.50% AER interest rate is paid on balances up to £5,000. Balances above £5,000 will not receive any interest. |
| Lloyds Bank | Club Lloyds Current Account | £5,000 | 1.49% | 1.50% | Easy access. A minimum monthly deposit of £1,500 and a minimum of two different direct debits each month must be made or a £3 fee will apply. Balances above £5,000 will not receive any interest. Interest is paid on the 1st of each month. | |
| Tesco Bank | Current Account | £3,000 | 1.00% | 1.00% | – | Easy access. The 1% gross/AER interest rate is only paid on balances up to £3,000. Balances above £3,000 will not receive any interest. A minimum of £750 must be paid into the account each month and you must pay at least three different Direct Debits from your account each calendar month to qualify for this interest rate. Interest is paid monthly. |
Source: Savings Champion
Rates correct as at 08.04.2019
