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TSB launches new current account paying 5%

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
05/12/2014

TSB Bank has launched a new current account paying customers 5% on balances up to £2,000.

TSB Plus account customers will earn 5% indefinitely – so if you keep £2,000 in your account at all times you will earn £80 per year after 20% tax if you are a basic rate taxpayer.

The account will be available to new and existing customers from the end of March and will require a minimum monthly deposit of £500. Customers will not have to switch across any direct debits to open an account.

According to analysis by research firm Moneycomms.co.uk, the new TSB account ranks second behind Halifax Reward for credit balances of £500, top for balances of £2,000 and fifth best in the rankings if you have a balance of £5,000.

Andrew Hagger of Moneycomms.co.uk said the new account contains a “loophole” which could set “alarm bells ringing” at the bank.

“TSB could see an influx of consumers opening two TSB Plus accounts and earning 5% on a combined £4,000 balance, viewing it as an alternative to poor paying instant access savings accounts,” he said.

“Perhaps this is TSB’s thinking – it knows it will draw in a raft of balances which then gives it a chance to woo these particular account openers with top notch customer service thus encouraging them to put down sticks as long term current account customers – direct debits and all?”

Other features of the TSB Plus account have been inherited from the old Lloyds current account tariff.

Overdraft interest is charged at 19.94% and there is a £6 monthly charge for using an unauthorised overdraft – plus a £10 buffer. By contrast the new M&S account announced last week comes with a buffer of £100.

Debit card for purchases overseas will incur a 2.29% non-sterling transaction fee and there will be a £1 on-sterling fee for every card purchase made aborad.

“In summary – the credit interest element is quite generous (up to £2k max) particularly as it not a short term introductory offer although the account may be exploited by savers in search of a decent return,” said Hagger.

“However it’s almost as if the TSB account revamp process is only half complete as it still maintains the uncompetitive baggage from the old Lloyds era meaning that unlike M&S Bank this account is not an all-rounder and one to steer clear of if you want a cheap overdraft or low cost debit card transactions when holidaying abroad.”