Bank of Scotland has become the latest provider to cut the interest rate on its bank account, following Lloyds Bank and Santander.
From this Sunday (11 June), customers with ‘Vantage’ current accounts will see the top rate fall from 3% to 2%.
Previously, current accounts with Vantage – a free upgrade to Bank of Scotland’s Classic, Silver, Platinum, Gold or Premier Accounts – earned 1.5% on balances of £1 to £999.99, 2% on £1,000 to £2,999.99, or 3% on entire balances between £3,000 and £5,000.
The bank will scrap this tiered system and replace it with a flat interest rate of 2% AER on credit balances between £1 and £5,000.
For account holders with smaller savings, this could mark a slight improvement, but savers with larger balances will lose out.
|Balance £500||Balance £1,000||Balance £3,000||Balance £4,000||Balance £5,000|
|Old interest rate||£7.50||£20||£40||£130||£150|
|New interest rate||£10||£20||£40||£80||£100|
Is Vantage still a good deal?
Many savers are turning to high-interest current accounts to maximise their returns.
- Nationwide pays the top rate of 5%, but this is limited to balances of £2,500 and drops to just 1% after one year.
- Tesco Bank has promised to keep its rate at 3% on balances up to £3,000 until April 2019.
- TSB Classic Plus also pays 3%, but only on balances up to £1,500.
- Bank of Scotland Vantage now matches Club Lloyds, paying 2% on balances up to £5,000.
- Santander 123 only pays 1.5%, but this rate applies to balances up to £20,000 – a winner for larger balances (and the £5/month account fee is typically offset by cashback rewards).
The chart below compares returns for each of these accounts, based on different balances.
Juggling multiple current accounts
Opening a number of high-interest current accounts and moving money between them can maximise savings.
There are fees, minimum funding rules (ranging from £500 to £1,500 per month), direct debit requirements (some banks insist that you have at least three direct debits coming out of your account), and restrictions on the number of accounts you can open to consider.
Bank of Scotland has confirmed to Which? that customers can still hold a maximum of three accounts to maximise their interest, which can be any mixture of joint or sole accounts.
|Account||AER||Max. balance||Monthly pay-in||Direct debits||Max. no of accounts||Customer score|
|Bank of Scotland Vantage||2%||£5,000||£1,000||Two||Three||62%|
|Club Lloyds [a]||2%||£5,000||£1,500||Two||Two (if one is joint)||62%|
|Nationwide FlexDirect (year one)||5%||£2,500||£1,000||None||Two (if one is joint)||77%|
|Nationwide FlexDirect (year two+)||1%||£2,500||£1,000||None||Two (if one is joint)||77%|
|Santander 123 [b]||1.5%||£20,000||£500||Two||Two (if one is joint)||62%|
|Tesco Bank Current Account||3%||£3,000||£750||Three||Two||70%|
|TSB Classic Plus||3%||£1,500||£500||None||Two (if one is joint)||67%|
[a] Club Lloyds costs £3 in any month you don’t pay in £1,500
[b] Santander 123 costs £5/mth (£60/year) but this can be offset by 1-3% cashback on household bills (worth 1% cashback on Santander mortgages, council tax and water bills, 2% cashback on gas and electricity bills and 3% cashback on TV and telecoms bills)