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Join Which? MoneySaving with challenger banks: how do accounts from Monzo and Kroo compare?
Find out the top savings rates, and whether an online-only bank could be a good
option
As competition in the savings market intensifies, challenger banks are weighing in on the action, with Monzo and Kroo among the most recent providers to launch competitive savings accounts.
Kroo is a new provider, having launched its first current account in December last year. Its current account pays 3.03% AER - a rate that beats many instant-access savings products.
Meanwhile, Monzo launched its first savings account on 16 February, paying 3% AER. The challenger bank has previously offered savings products via other providers.
Here, Which? takes a closer look at what the Kroo and Monzo accounts offer, and whether savers can find a better deal elsewhere.
What is Kroo and what does it offer savers?
Kroo is an app-only bank that was founded in 2016, but only launched its first current account in December 2022.
It originally offered 2% interest on deposits of up to £85,000, but the rate increased to 3.03% from 1 February. While it is a current account, rather than a savings account, it works in much the same way as most instant-access products, which allow you to withdraw cash any time without a penalty.
Other perks include a tool which allows customers to share, track and split bills. It also offers zero fees on spending when using its debit card abroad, and a lower overdraft APR than most high street banks (subject to status and by invitation only).
Kroo is a UK-regulated bank and money in the account is also fully covered by the Financial Services Compensation Scheme (FSCS), which protects balances up to £85,000 per person.
Apart from its attractive interest rate, Kroo is keen to differentiate itself from its many competitors, calling itself a 'socially conscious digital bank'. As such, it says it will plant two trees for every current account opened through its charity partner, One Tree Planted.
How do other challenger banks compare?
The table below shows the savings rates on offer from popular challenger banks - it doesn't include Kroo as it offers a current account.
| Account | AER | Terms |
|---|---|---|
| Chase Saver Account | 3% | No minimum deposit |
| Monzo Instant Access Savings Pot | 3% | No minimum deposit |
| Atom Bank Instant Saver | 2.95% | No minimum deposit |
| Zopa Smart Saver | 2.86% | No minimum deposit |
| Tandem Bank Instant Access Saver | 2.85% | No minimum deposit |
Source: Moneyfacts. Correct as of 16 February 2023, but rates are subject to change
Kroo's current account paying 3.03% AER can just about beat these instant-access rates - albeit by a very small margin.
Chase, which comes a close second to Kroo, upped its instant-access rate from 2.7% to 3% on 13 February. This is only available to those who hold a Chase current account.
It also extended its 1% cashback offer on current account spending for an additional 12 months after the expiry of a customer's initial offer. Plus, from April 2023, the app-only bank will offer 1% AER on all current account balances, with no fees or minimum monthly deposits.
Monzo - which achieved a customer score of 82% in our latest banking satisfaction survey - also offers 3% AER on its first instant-access account. It can be used with its round-ups features, and you're also able to schedule deposits and lock the account until a certain date if you want to be prevented from dipping into the funds. It's for Monzo current account customers only, and you can deposit up to £100,000.
- Find out more: challenger and mobile banks explained
Can you get a better rate elsewhere?
The ease with which you can open and manage an account is one of the biggest selling points about challenger banks - it's often as simple as downloading an app on your phone. With fewer overheads than high street providers with branch access, they are also able to offer more competitive rates.
But with variable savings rates continuing to rise and competition for customers still fierce, how do other providers compare?
This table shows the top rates for restriction-free instant-access savings accounts.
| Account | AER | Terms |
|---|---|---|
| Cynergy Bank Online Easy Access Account | 3.11% | £1 minimum deposit |
| Shawbrook Bank Easy Access | 3.06% | £1,000 minimum deposit |
| Gatehouse Bank Easy Access Account | 3% (EPR*) | £1 minimum deposit |
| Post Office Money Online Saver | 3% | £1 minimum deposit |
| Saffron Building Society E-Saver Account | 2.95% | £10 minimum deposit |
Source: Moneyfacts. Correct as of 16 February 2023, but rates are subject to change. *The account from Gatehouse Bank is Sharia-compliant, and so pay an expected profit rate (EPR) as opposed to an annual equivalent rate (AER).
As the table shows, Cynergy Bank currently offers a higher rate than the challenger banks.
While looking at the rate is important when choosing a savings account, it's also wise to consider other factors - for example, whether branch access matters to you, and the level of customer service offered.
- Find out more: how to find the best savings account
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Listen nowConsider other high interest current accounts
Kroo isn't the only provider offering a high interest current account.
Nationwide's FlexDirect account, for example, pays 5% AER - although that's only on deposits up to £1,500 and for the first 12 months. After a year, the rate drops to 0.25%. It also requires a minimum monthly deposit of £1,000.
Virgin Money's M Plus current account pays 2.02% AER on the first £1,000 and there's no minimum opening or monthly deposit requirements. Other perks include no debit card fees abroad and a linked M Plus Saver account paying 2.52% on up to £25,000.
- Find out more: best high interest bank accounts
Is my money safe with a new bank?
If you're nervous about saving with a bank you've heard little about, there are some checks you can make to ensure your money is protected.
A good starting point is to find out whether they are covered by the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 of a saver's pot if a bank goes bust.
While challenger banks have to abide by the same rules and regulations as other banks, not all of them are FSCS protected. For example, while the likes of Kroo, Starling and Monzo have banking licences in the UK, some companies such as Revolut operate under electronic or e-money licences instead. This means that although money must be ring-fenced in a segregated account, you don't get direct protection from the FSCS.
It's also a good idea to check what features the provider offers to ensure your banking app is as secure as possible, minimising the impact if your phone gets stolen. For example, many digital banks have location-based protections to prevent fraudulent payments where the location of the card and the app don't match. Others use biometric technology such as your voice and face to secure the app.
- Find out more: how safe is online banking?
