Nationwide Building Society has thrown down the gauntlet to high street banks by announcing a current account that pays 4.25 per cent interest.
The rate will be available to new and existing FlexAccount customers from 1 April; Nationwide says it will be the best standard credit interest on the high street. Consumers who switch to a FlexAccount would be up to GBP 130 a year better off, says Nationwide.
The Big Four banks – Barclays, HSBC, Lloyds TSB and NatWest – have 70 per cent of the market but pay just 0.1 per cent credit interest to almost all their customers. Which? has long advised consumers to shop around for the best bank account rates through our Switch with Which? site (see below).
Switching is easier than many people think
Ashleye Gunn, Head of Money Research at Which?, said: ‘With its low overdraft rate, good customer service and free debit card use abroad, Nationwide has been a Which? Best Buy for some time. But 4.25 per cent credit interest for FlexAccount holder – not just customers who bank online – is great news.
‘This is a real challenge to the Big Four banks to start treating their customers fairly. They pay virtually no credit interest to almost everyone, their overdrafts cost around twice as much as Nationwide’s and they consistently score poorly in our customer service surveys. Anyone banking with them can get a much better deal elsewhere, and switching is easier than many people think.’
Nationwide estimates that if the big four banks offered the same package as the FlexAccount, current account holders could earn up to GBP 4 billion in credit interest in a year.
To qualify for the FlexAccount deal, customers must pay in at least GBP 1,000 each month, which would cover anyone earning the average salary. The 4.25 per cent interest rate is paid on balances up to a maximum of GBP 3,000.
There are no fees as long as customers are in credit. The overdraft interest rate is 7.75 per cent, which Nationwide says is the lowest of the high-street banks.