TSB has launched a new current account offering 5% interest on balances up to £2,000.
The TSB Plus Account will be available to new and existing customers from the end of March.
There is no charge for the account and customers will only have to pay in a minimum monthly deposit of £500 to be eligible for interest. They can opt to bank in branch, online or over the telephone.
TSB is permitting up to two accounts per person, allowing customers to split £4,000 over their allocation.
This gives the potential for £120 in interest for higher rate tax earners and £160 for those paying the basic rate of tax every year.
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How does the TSB current account compare?
TSB will offer a 5% interest rate indefinitely. In comparison, Nationwide’s FlexDirect current account offers 5% interest for just 12 months, albeit with a fee-free overdraft.
Nationwide does not charge a monthly fee on its current account, which is available for balances up to £2,500. The interest rate reverts back to 1% after 12 months and Nationwide requires customers to pay in £1,000 per month.
Santander’s 123 account offers 3% interest on balances of up to £20,000, so may still be the best option for those with large balances.
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Try before you buy
Applicants are not required to hold the TSB Plus account as their main account and customers don’t have to transfer direct debits or standing orders.
The bank promises to help new account holders to move ‘as and when they are ready’.
Overdrafts and overseas card use
A 19.94% interest charge will be incurred on overdrafts on the TSB Plus Account after a £10 buffer. A £6 charge will apply monthly for authorised overdrafts, although overdrafts will be fee-free for the first three months.
Overseas purchases and cash advances using the account’s card will incur a 2.99% transaction fee plus a £1 fee for non-sterling purchases.
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