TSB enters the high-interest current accounts battle
After a disappointing showing in the recent banking customer service rankings, TSB has actually got off its imaginary backside and tried to do something positive for its customers. From the end of March, TSBs new current account will pay 5% interest on current account balances up to £2,000.
Of course, the deposity current account is not a new idea- and TSB is going up against the Nationwide FlexDirect account that pays 5% on balances up to £2,500. The difference is that the Nationwide rate is only available for the first 12 months, after which it reverts to a rather less impressive 1%, whereas the TSB rate is, so far at least, available indefinitely. The account needs to be serviced with a £500 deposit every month- lower than many other rewarding current accounts which require £1,500 minimum.
So how much interest would the account give you? Five percent is a massive rate, at ten times the current base rate, so savers are likely to be rubbing their hands together with glee at the prospect of spending the net return of £80 a year (assuming you hold £2,000 constantly), or £60 a year if you’re a higher rate taxpayer.
But clever sorts can actually double their return- the terms and conditions of the account permit a maximum of two such accounts to be held per person, which therefore means that everyone can have two accounts. Invest £4,000 and you’ve got £160/£120 looking to burn a hole in your pocket in 12 months’ time. Of course, TSB’s erstwhile owner Lloyds did a similar thing with a Vantage account some years ago, when so many people opened multiple accounts that the account had to be pulled. There’s always greedy people out there spoiling it for the rest of us, eh?
So will this be enough to tempt people to TSB and to ease the ruffled feathers of those who found themselves with a TSB account whether they liked it or not? Who knows. Those with more than £2,000 (£4,000) spare cash might prefer to go for TSBs existing Enhance account which pays 3% on balances between £3,000 and £5,000. If you are only looking at the deposit part of this account, the headline rate might be all that concerns you. However, if you would be using this as a current account (which it actually is), you should also look at things like overdraft rates and charges, and fees for using cards abroad. For some, and depending on the average credit balance held, other accounts, like the Halifax Reward or Santander 123 may actually prove more lucrative.