Consumers looking to take advantage of the 5% interest rate being offered by Nationwide on its FlexDirect account have just days left to open the account as the rate is due to be cut on 1 May 2020.
Those with a FlexDirect account can currently earn 5% AER for the first 12 months on balances up to £2,500, making this account an attractive option for those with large deposits. From 1 May, however, new customers will only get a rate of 2% AER for 12 months on balances up to £1,500.
Our research has also found that a number of banks are set to follow Nationwide in cutting rates on current accounts next month. TSB is set to cut its rate of 3% AER on balances of up to £1,500 on its Classic Plus Account to 1.50% AER on 2 May. Santander will cut the rate on its 123 Current Account from 1.50% AER to 1.00% AER on balances up to £20,000 on 5 May, while Starling Bank is due to cut the rate on its Current Account from 0.5% AER on balances up to £2,000 and 0.25% AER on balances up to £85,000 to 0.05% AER on balances up to £85,000 on 18 May.
Today's top high interest current accounts
|Provider and account||Credit interest now||Changes in May|
|Nationwide FlexDirect||5% AER credit interest on balances up to £2,500 (first year)||1 May = 2% AER credit interest on balances up to £1,500 (first year)|
|TSB Classic Plus Account||3% AER credit interest on balances up to £1,500||2 May = 1.50% AER credit interest on balances up to £1,500|
|Santander 123 Current Account||1.50% AER credit interest on balances up to £20,000||5 May = 1.00% AER credit interest on balances up to £20,000|
|Bank of Scotland Classic - with Vantage||1.00% AER credit interest on balances up to £3,999.99, and 2.00% AER £4,000 up to and including £5,000||No changes scheduled for May|
|Lloyds Bank Club Lloyds||1.00% AER credit interest on balances up to £3,999.99, and 2.00% AER £4,000 up to and including £5,000||No changes scheduled for May|
|Starling Bank Current Account||0.5% AER credit interest on balances up to £2,000 and 0.25% AER on balances up to £85,000||18 May = 0.05% AER credit interest on balances up to £85,000|
|Virgin Money Current Account||0.50% AER credit interest on balances up to £2,000||No changes scheduled for May|
Please note: Some accounts may have certain eligibility criteria or charge a fee. Source: Moneyfacts.co.uk
Commenting on the cut in rates on current accounts, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Time is running out for consumers to secure the top high interest rate available on a current account, with just days in fact. Not only is the top rate of 5% credit interest disappearing form the current account market, but other providers, such as Santander, Starling Bank and TSB, are cutting their own credit interest rates next month too. It seems that in a low interest rate environment, the impact of the Coronavirus (Covid-19) pandemic is having an effect on the current account market now too.
“If consumers want to earn 5% AER (4.89% gross) for the next 12 months on a current account, then they will have to apply before 1 May to Nationwide to open its FlexDirect Account, where it will pay this rate on balances up to £2,500. After this date, the credit interest rate will drop to 2% AER (1.98% gross) and it is applied to balances up to £1,500. This is calculated as a yearly interest loss of £95 based on the AER rate drop and lower balance to earn interest on (5% on £2,500 versus £2% on £1,500). It’s disappointing to see such a lucrative offer being cut, but Nationwide had offered 5% AER on its FlexDirect account for new customers for the past seven years, albeit applied for only the initial 12-month period of account opening.”
While providers are starting to cut rates on current accounts, consumers looking to get an attractive rate should still consider a high interest current account as an alternative to savings. In addition to this, providers looking to attract new customers to open current accounts could look at increasing interest rates on existing current accounts or launching new accounts with high rates, as such consumers should keep an eye on the chart in case new attractive rates become available.
Springall added: “These cuts will be another blow to savers who are seeing interest rates plummet across the savings market as it will become more difficult to get a competitive return on their cash, but current accounts could still be a salvation for savers regardless, as the top high interest current accounts can pay better rates than most of the standard saving account market. Apart from credit interest, there have been other means for consumers to earn something extra from their current account, such as with switching incentives. However, many providers have withdrawn these offers since the start of this year, for example with HSBC stating its focus was to support their customers affected by the Coronavirus outbreak.
“During these uncertain times, it’s important consumers take time out to ensure they have the most suitable account for them to weather the storm. It’s quick and simple to switch an account using the Current Account Switch Service (CASS), and they may be financially better off to do so.”
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