The battle for customers continues with two more competitive current accounts opening for business.
The battle between banks to convince people to switch their current account continues with new launches from both TSB and Lloyds Bank. And both are paying very attractive interest rates, which is good news for people looking for a decent home for some of their savings.
TSB Classic Plus
TSB’s new fee-free Classic Plus account is offering a very decent array of benefits. The biggest is that it pays 5% interest on balances up to £2,000. And this interest rate isn't for a limited period, it's for good. To earn this, you need to deposit £500 a month from another, non-TSB account, but that is a lower amount than most of its rivals. No interest is paid on balances over £2,000.
You also need to register online for paperless statements to qualify.
You also get a £10 interest- and fee-free overdraft buffer, and you can apply for a £25 interest- and fee-free planned overdraft.
If you do occasionally dip into the red, you can add what TSB calls Control. This costs £10 a month but means you don’t get charged any overdraft or returned item fees if you overspend. Whatever you overspend will simply be rejected. If you’re using this, you just need to be wary of important bills or charges going unpaid.
If you do want to take advantage of the interest rate, it's worth knowing that you can have two accounts per person.
Club Lloyds
Meanwhile, Lloyds has launched the Club Lloyds current account. This charges a monthly fee of £5, unless you pay in at least £1,500 from a non-Lloyds account each month. You can also earn up to 4% interest on up to £5,000. This is tiered as follows:
- 1% on balances between £1 and £1,999.99;
- 2% on balances between £2,000 and £3,999.99;
- 4% on balances of £4,000-£5,000.
However, you need to set up at least two direct debits from the account to earn interest. No interest is payable on balances over £5,000.
You can also have a £100 interest- and fee-free planned overdraft.
[SPOTLIGHT]There are also a range of other benefits. You can earn up to 15% cashback by shopping online via Lloyds’ Everyday Offers website using your Club Lloyds debit card. And you can choose one so-called ‘Lifestyle Benefit’ each year you have the account. You can currently pick from: an annual Gourmet Society membership; six Vue cinema tickets; or an annual subscription to one of 14 magazines.
You’ll also have access to preferential savings and mortgage rates, including a new Club Lloyds Monthly Saver savings account paying 4% interest for a year.
Unlike the TSB Classic Plus account, the Club Lloyds account is clearly designed to get people to switch their main current account to Lloyds.
However, these aren’t the only current accounts paying decent interest rates.
Other options
Nationwide’s FlexDirect account also pays 5% interest, albeit only for a year. You need to pay in £1,000 a month from a non-Nationwide account to earn this rate. You also get a fee-free arranged overdraft for the first 12 months.
You can also earn 3.83% on balances up to £3,000 until March 2015 with the Current Account Direct from Clydesdale Bank and Yorkshire Bank. You need to transfer a minimum of £1,000 from another account to qualify.
Meanwhile, the Santander 123 account pays 3% on balances between £3,000 and £20,000. However, this account costs £2 a month, although you need to set up at least two direct debits to earn interest, so if you make sure they’re utility or council tax bills you’ll earn cashback on them, which should cancel out the fee. You must also pay in at least £500 a month from a non-Santander account.
If you make Santander your main current account using the Current Account Switching Service you can also have a four-month fee-free arranged overdraft.
Verdict
If you’re looking to earn interest on a small amount of savings, then the new TSB Classic Plus account is definitely a good option.
If you have a larger savings pot, you could spread it around between TSB, Nationwide, Lloyds, Clydesdale, Yorkshire and Santander, setting up direct debits between them all.
If you want a free overdraft, you’re better off looking at Nationwide’s FlexDirect account or using a 0% money transfer credit card to pay it off once and for all.
But if you want just one current account for the long term, then Santander’s 123 account takes some beating.
More on banking:
Why comparing current accounts is about to get easier