Virgin Money launches first current account – how competitive is it?

Virgin Money made headlines last week when it launched its first digital current account, with a linked savings account offering 1% AER, but here we take a look at how competitive the current account and savings account really are.

The Virgin Money Current Account offers 0.50% AER and offers an overdraft at a rate of 19.9% EAR. There are no monthly fees on the account, which can be managed in Virgin Money branches, by post, in post office branches, by phone, online, via mobile app and via text alerts.  

While Virgin Money is offering an interest rate of 0.50% AER on balances up to £2,000, this does not compare well to the highest rate on offer of 5.00% AER. Nationwide Building Society offers 5.00% AER on balances of up to £2,500 for the first 12 months on its FlexDirect account. This account has no monthly fees but does require a minimum of £1,000 to be deposited into the account per month. It does however charge a significantly higher overdraft rate than Virgin Money of 39.90% EAR and can be managed by post, in post office branches, online, via mobile app and text alerts.

In addition to this, there are accounts available that offer the same interest as Virgin Money, but which offer more competitive overdraft fees. Starling Bank’s Current Account for example offers 0.50% AER on balances up to £2,000 while also charging a lower overdraft rate than Virgin Money of 15.00% EAR. This account can be managed by post, in Post Office branches, by phone, via mobile app and text alerts.

When a Virgin Money Current Account is opened, a linked easy access savings account is automatically opened at the same time to help make it easier for consumers to save. Virgin Money Instant Savings pays 1.00% at £1 quarterly and allows unlimited further additions. Withdrawals can be made via Virgin Money Current Account or a nominated account. The account can be opened in Virgin Money branches, online or by phone and then managed all these ways as well as by mobile app.  

There are many easy access savings accounts that beat this rate of 1.00%, for example Shawbrook Bank currently offers 1.41% monthly on its Easy Access 17 account. The account requires a minimum deposit of £1,000and allows unlimited further additions and withdrawals. It can only be opened online but can then be managed by phone as well.

Although there are other current accounts and savings rates offering better deals in terms of rates than the Virgin Money Current Account, this account has the benefit of providing all aspects of everyday banking in one place. The Virgin Money Current Account not only offers a joined current account with a savings account, but also includes a range of features including budgeting and savings tools, a smart ‘sweep’ feature that automatically transfers money from customers’ savings accounts when running low, enhanced security features, and live spending data, notifications and alerts.

Commenting on the launch of the new Virgin Money account, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “This is an exciting current account launch and may well entice consumers looking for a decent deal for their everyday banking, to kick-start their savings habit, and really get to grips with budgeting.

“The run-up to Christmas is likely to be an expensive period for many, so there could be consumers going into 2020 looking to rein in their spending and start afresh. Having an instant way to check all the outgoings and have tools to budget can make a big difference.”