TSB Bank has launched an innovative current account that dually functions as a saving account and pays its users an attractive 5% AER interest on their balances.
The TSB classic plus account is the bankís first current account offering since their high profile split from Lloyds, and grants users 5% AER on balances up to £2000.
This means that anyone depositing £2,000 into the account for saving purposes would acquire £100 of interest each year, which is excellent considering the current complexion of standard savings accounts in the UK, where many of the best buys barely pay users over 3%.
Users must be prepared to use online banking and register for paperless statements and correspondence (when available) in order to qualify to hold the account, and are required to deposit at least £500 into it each month in order to receive the interest rate of 5% AER.
However, aspiring savers will be boosted by the news that TSB will allow individuals to hold two accounts at the same time, meaning that up to £4000 can be placed into the account for interest acquisition that totals £200 each year.
Moreover, there is no obligation on the new user to transfer their standing orders and direct debits over from their existing primary current account to TSBís classic plus, as their ëtry before they buyí policy means that users have no pre-assigned time frame in which these need to be transferred over.
Applicants will have to provide details of your investments, benefits and pension schemes, whilst also parting with information about their employer, but benefit from the simple and free process of switching, the availability to new and existing customers as well as the rate being permanent, rather than a headline one.
Those who desire to use the account for overdraft purposes should look elsewhere however, as interest on this facility is charged at a high 19.94% and comes with a £6 monthly fee for being used at all. Moreover, only the first £25 of the overdraft is given interest free subject to approval whilst users receive a £10 buffer if they accidentally dip into their overdraft, which is substantially lower than M&Sís new offering set be unveiled this summer.
However, for anyone who has a relatively small amount of savings, the account should most certainly be looked at closer, because you could stand to make more on interest than you would on say an ISA, due to their low rates and superior suitability for people with larger balances of money. Indeed, you could probably garner a larger amount even after tax from utilising the account for £4000 of your yearly savings, and then supplement this with a good ISA or savings account to maximise your return. The £500 compulsory monthly contribution would not be taxing as you could simply withdraw the cash and deposit it again at the end of month.
Current account revolution
TSBís new attractive and hybrid offering is one of many that are expected to brace the market in the upcoming months, with the entire current account sector undergoing a transition phase that will see providers vying for supremacy this summer in order to encourage people to acquire their new product.
Early in March, M&S revealed that they would be launching a new innovative current account this summer that will grant users an automatic £500 overdraft facility subject to approval, of which the first £100 will be given interest free.
Users will also benefit from the lower foreign exchange fee of 2.75% that comes along with the card and the rewards scheme and gift vouchers that will be given to new account holders across the year.
Nationwide have also garnered praise with their Flex Direct online and phone account which pays users interest at an attractive 4.89% on balances up to £2500. However, this is a headline rate that lasts for 12 months and then decreases to 1%, and you must put in £1000 each month during the first year in order to retain the higher rate.
And TSBís ex associate Lloyds have also unveiled their new Club Lloyds account which is intended to ëreward customer loyalty and everyday bankingí.
The account comes with a tiered interest rate structure that savers of different balances can benefit from, with the top balance that can receive interest being £5,000. The maximum interest a user stands to earn with the card is more or less equivocal to TSB and stands at 4%, meaning those who save £5,000 would earn £160 each year after tax.
The tiered rates stand at 1% for balances up to £1999, 2% on balances from £2000 to £3999, and 4% on balances from £4000 to £5000.
One per cent will be given on balances from £1 to £1,999.99, 2pc will be paid on any amount from £2,000 to £3,999.99 and the top rate of 4pc will be paid on balances of £4,000 to £5,000.
The account is available to both existing and new customers, meaning that the latter can simply switch to the new offering if they believe it is superior to their current account whilst new customers do not have to deal with exclusivity clauses which often prevent the acquisition of some of the markets most attractive offerings.
Users also get a discount of 0.2% on the mortgage rate they are given if they apply for one in the future and receive a £100 interest free overdraft facility.
Account holders must pay £1500 into the account on an annual basis to avoid a monthly fee of £5, though the card comes with a number of perks to choose from including cinema facilities.
Clearly, bank account holders are now aware that a battle has emerged for saving account supremacy, and that this has now transferred to the current account sector. Expect a number of new and attractive cards to be released in the next few months that come along with similarly attractive saving account interest rates and a multitude of perks, as the sector experiences somewhat of a revolution moving forward to the summer.
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