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The fall and fall of current account interest rate

The fall and fall of current account interest rate

Category: Banking

Updated: 06/10/2010
First Published: 06/10/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Interest rates paid on current account balances are the latest perk to fall by the wayside because of the economic climate, Moneyfacts.co.uk figures show.

Current accounts are not known for paying attractive rates, but a number of providers have decided to stop paying any interest altogether.

In recent weeks, NatWest and RBS have stopped paying credit interest on all of their current accounts.

Santander has also decided to stop paying any interest on selected current accounts, and pays nothing on funds over £2,500.

However, Santander does offer customer that switch to its current account a rate of 5% on their money and £100 cashback for joining as long as it is funded by at least £1,000 a month.

The banks add to a growing list of providers that no longer pay credit interest on current accounts, including Barclays Bank, HSBC and The Co-operative Bank.

More than half (55%) of current accounts on the market pay no credit interest, while a further 28% pay 0.10% or less.

At the same time, the number of fee paying current accounts has doubled in the last five years

There are currently 49 current accounts that charged a fee. This is up from 41 a year ago, 36 two years ago, and just 25 five years ago.

"The loss of interest at 0.10% is likely to make little difference to each individual customer, but for the banks it will be a significant cost saving," commented Michelle Slade, spokesperson for Moneyfacts.co.uk

"Most people bank with one of the big banks, so it is highly likely the majority of people are receiving no interest on the money in their current account.

"Anyone maintaining a significant balance in their current account should consider switching to an account that pays interest or move their money into a savings account.

"Customers remain reluctant to switch current accounts as it's seen as too much hassle, but by doing so they could make more of their money.

"If the rising trend in fee paying accounts continues, it could suggest the beginning of the end of free banking as we know it."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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