TSB has launched its new Plus current account, offering 5% interest on credit balances.
The bank has thrown down the gauntlet to rivals with its new fee-free current account, Plus, which is the first major account to be launched by TSB since it separated from Lloyds Banking Group last year.
Offering 5% interest, the Plus account offers a direct challenge to Nationwide’s FlexDirect account, which offers the same rate of return.
TSB's account offers the 5% rate on balances up to £2,000, whereas Nationwide pays on balances up to £2,500.
But TSB customers only need to deposit £500 per month into the account to benefit from the 5% rate. Nationwide, by contrast, asks for a minimum of £1,000 per month.
TSB Plus account holders will also be able to benefit for longer, as the bank has set no time limit on its 5% offer. Nationwide FlexDirect customers only receive the 5% rate for twelve months before it reverts back to 1%.
TSB is also offering customers the opportunity to try the new account before they commit fully to switching to the bank.
Most current account incentives now require customers to switch banks using the new seven-day switch service, but TSB says that new customers will not need to switch to take advantage of the 5% offer.
Customers will need to deposit £500 per month into the account to qualify for the 5% interest rate, as well as registering for online banking and agreeing to paperless statements.
TSB Plus Account
- No monthly fee.
- 5% interest on balances up to £2,000. No time limit.
- Minimum £500 deposit per month for interest benefit - lower than competitors.
- No obligation to switch banks.
Current Accounts and Incentives
TSB’s new 5% offer reflects the current trend of incentives designed to encourage people to switch accounts.
First Direct and Halifax offer a £100 cash bonus to those who switch their current accounts using the new seven-day switch system. The Co-operative Bank offers £100 plus a £25 donation to charity.
M&S Bank currently offers a gift card worth £150 to those who take out one of their loyalty-driven packaged accounts, which are currently priced at £10 and £17.50 per month.
The retailer will continue to offer a gift card worth £100 if customers switch to its new free current account in the summer using the seven-day service.
Is TSB Any Good For Savers?
It’s been clear in recent months that the best returns on the market are available from current accounts rather than traditional savings accounts.
Even the best tax-free offerings fall woefully short. The best instant access ISA offers 1.75% from Stafford Railway Building Society, with no inbound transfers accepted.
So, the TSB Plus is another useful option in the marketplace, especially for balances of a few thousand pounds.
Unusually, consumers will now be able to allow their cash to languish in a transaction account and still earn decent rates of return.
And unlike Nationwide FlexDirect customers, they won’t have to begin looking around again in a year’s time.
But the limit of a few thousand pounds is a hindrance. For amounts above around £4,000, the Classic Account with Vantange from Lloyds (3% up to £5,000) or Santander 123 Current Account (offering 3% on balances between £3,000 and £20,000) might yet prove a better option.