TSB is slashing its 5% current account rate – here’s what else is available
TSB is chopping a 5% interest rate on its current account to 3% from July, in a blow to savers.
The bank, which suffered a huge IT meltdown last year, said that from July 2 the annual rate of interest paid on the Classic Plus Current Account will change from 5% to 3% on balances up to £1,500.
Finance experts said that while the news is “disappointing”, for those considering using the Easter holidays to look for alternatives, people can still earn 5% interest elsewhere.
TSB’s rate was previously increased to 5% in May 2018, following IT woes in spring that year which saw customers struggling to access their accounts.
It is writing to customers to notify them of the change.
The bank, which has 5.2 million customers across a range of its products, declined to say how many customers will be affected by the rate tumble.
TSB said it constantly reviews its rates to make sure they are both sustainable for the bank and right for its customers and the ongoing 3% rate still compares well with its competitors.
To benefit from TSB’s 3% rate customers must pay at least £500 a month into their current account and have registered for internet banking as well as having chosen paperless statements and correspondence.
In some better news for customers, the bank said TSB current account customers can earn up to £375 for recommending TSB’s Classic or Classic Plus Current Account to up to five friends if they all switch.
Friends who have been referred and switch their bank account to TSB will also receive £75 in the offer running until June 30.
The offer was launched as rival bank NatWest also unveiled a new sweetener to tempt switchers.
NatWest is offering £175 to new and existing customers switching their main bank account in an offer running until June 7.
NatWest said it is the highest switching incentive the bank has ever offered. The £175 will be split into two payments – £125 after the first few months and a further payment of £50 once the account has been open for a year.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “It’s disappointing news that TSB will be dropping its lucrative credit interest rate by 2% in July, especially as it increased the rate last year after its IT systems caused chaos for customers.
“Thankfully, customers can still earn 5% elsewhere, such as with Nationwide’s FlexDirect that pays 5% for the first 12 months on balances up to £2,500 and customers will just need to pay in £1,000 a month.”
She said TSB’s current account “is still a decent offer and it should be considered against the rest of the competition”.
Ms Springall continued: “Customers who have a little extra time on their hands over the Easter break may well be looking for a brand new current account, and thankfully there are some great switching incentives out there.
“One of the most generous was launched today by NatWest offering £175 when customers switch to them.”
Looking at other switching offers, Ms Springall said: “Those who switch to M&S Bank and get up to £180 in a gift card, with £100 up-front and a further £80 after 12 months and First Direct will pay £100 up-front for those who switch to their 1st Account.
“Halifax also have an offer for switches, as they will pay £50 when they switch and a further £85 after six months if customers pay in at least £1,500 per month, go paper-free and use their debit card.”
Ms Springall continued: “The switching incentives from TSB and NatWest as conveniently timed, as HSBC withdrew its £150 cash offer on its Advance Account last week.
“Nationwide still offers its recommend a friend incentive, where customers can share £200 with them they switch their main current account – currently customers could earn up to £500 per year by recommending five friends.”
Ms Springall said: “As with any current account, customers would be wise to consider all the benefits of the account, including the overdraft tariff, and not be swayed by just an up-front free perk.”