TSB cuts 5% interest rate to 3%: should you switch?

TSB has cut the rate on its Classic Plus Current Account and lowered the total balance that can earn interest in the account.

From today (January 4), customers will see the rate fall from 5% on balances up to £2,000, to 3% on balances up to £1,500.

So is the account still worth going for? We take a look at some of the best current accounts on the market to help you decide.

Santander 123 Current Account

Despite cutting its interest rate from 3% to 1.5% in November 2016, the 123 account still a good shout for people with larger savings pots. The rate is applied to balances up to £20,000 and there's also the opportunity to earn up to 3% cashback on household bills.

To open an account you'll need to deposit at least £500 a month and have a minimum of two active direct debits.

But be warned: there's a £5 a month account fee which will set you back £60 a year.

Nationwide FlexDirect Account

Nationwide is still offering 5% interest on its FlexDirect Account but it only applies for 12 months on balances up to £2,500.

You'll also get a fee-free overdraft for 12 months and you won't be stung with punitive monthly account fees!

Club Lloyds Current Account

The Club Lloyds Current Account is another one with a cracking interest rate which is up for the chop. If you sign up now, you can get 4% on balances of £4,000-£5,000. However, this will halve to 2% on January 8 but apply to all balances up to £5,000

To sweeten the deal you can choose a lifestyle perk including cinema tickets, a magazine subscription or dining offers.

Pay in a minimum of £1,500 a month and you'll avoid the £5 monthly fee.

Bank of Scotland Classic Account with Vantage

The Classic Account isn't much by itself, but if you add on Vantage you can bag 3% interest on balances between £3,000 and £5,000. It's free to add.

All you need is to stay in credit, pay in a minimum of £1,000 a month and have at least two active direct debits.

Tesco Bank Current Account

This current account will give you 3% interest on balances of up to £3,000.

What's more, you can earn five points for every £4 spent at Tesco and one point for every £8 you spend elsewhere.

Is it really worth the switch?

Although it's a substantial drop on the TSB account, 3% is still an impressive amount of interest, especially if you have a smaller balance. The other benefit is that the rate isn't limited to 12 months and the account also offers 5% cashback on your first £100 of contactless payments every month, including Apple Pay and Android Pay,

For those with more money in the bank, the Tesco Bank Current Account, Bank of Scotland with Vantage Account or Santander 123 Account offer a better deal.