What’s the deal?
The new TSB Plus account which launched online yesterday and is available in branches today, pays 5.00% interest on credit balances of up to £2,000. This matches the rate offered by the Nationwide FlexDirect account on balances of up to a higher £2,500.
However, while the Nationwide rate lasts for just the first 12 months and then reverts to just 1.00%, the TSB rate is ongoing.
The TSB account also only requires a minimum funding of £500 a month, half the £1,000 monthly funding required by Nationwide.
The Plus account is open to both new and existing customers of the bank and comes with no monthly fee. As TSB claims that it is happy to let people ‘try before they buy’, you can also open a Plus account and receive interest at 5.00% without closing your existing bank account. Go overdrawn, however, and you will face interest at 19.94%.
Who is it good for?
The TSB Plus account is a great option for anyone seeking a current account to keep in the longer-term, including those coming to the end of the 5.00% offer from Nationwide.
Only having to pay in £500 a month also opens it up to people on low incomes – you only need to be earning £6,000 a year in wages or benefits to qualify.
In fact, TSB’s figures indicate that four out of five Britons credit their main bank account with at least £500 a month, meaning that a massive 80% of the population could be eligible.
While Plus account customers can manage their money in branch, over the phone or online, the bank does require them to register for internet banking and paperless statements to be eligible for the 5.00%.
The move is based on research from the bank showing that 66% of people would opt for a paper-free bank account in order to receive a better interest rate. However, it will make the account less attractive to those who prefer to keep their paper statements on file, for example.
Customer service at TSB since its launch last year has also been patchy, which is why it might be best to take advantage of the ‘try before you buy’ option of opening an account without closing your existing one.
Finally, as mentioned above, the overdraft rate is high, so even going into the red for a short time will cost you dear.
What’s the verdict?
This is a fantastic offer for anyone looking to earn interest on their current account balance long-term. It is also far and away the best account on the market for people who can only pay in £500 a month.
As the account comes with a seven-day switching guarantee, moving direct debits and other payments across should also be hassle free – should you decide to use it as your main account.
The Plus account is designed as a current account. However, it also offers a way for hard-pressed savers to boost the return on nest eggs of up to £2,000. This is because you can open the Plus account, and benefit from the 5.00% rate, without switching direct debits and other payments from your existing account.
And that means that sophisticated customers could simply open the account and pay in £500 a month to qualify for the 5.00% rate, while continuing to use their existing current accounts.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.