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Last chance to open a Nationwide account offering 5% interest

Current accounts offering eye-catching interest rates are set to be decimated in May.  

Banks including Santander, Starling and TSB are all cutting the in-credit interest rates they pay current account customers between 2 and 18 May.

On top of that, from the start of next month the last 5 per cent savings deal in Britain, Nationwide Building Society’s FlexDirect current account welcome bonus, will be extinct.

However, Britain’s biggest mutual has confirmed that new customers can still open the account to bag the higher interest rate, if they get their skates on.

Extinction event: When Nationwide cuts the interest rate on its FlexDirect current account from 5% to 3% on 1 May, it will mean there are no more accounts around paying 5% interest

Extinction event: When Nationwide cuts the interest rate on its FlexDirect current account from 5% to 3% on 1 May, it will mean there are no more accounts around paying 5% interest

Extinction event: When Nationwide cuts the interest rate on its FlexDirect current account from 5% to 3% on 1 May, it will mean there are no more accounts around paying 5% interest

From 1 May, it will pay newcomers 2 per cent on balances of up to £1,500 for the first time 12 months.

This is the first time since at least 2012 when no savings account has paid 5 per cent interest, and this time last year five accounts paid this amount. 

Existing account holders, who currently earn 1 per cent on balances of up to £2,500, will see that cut by a quarter to 0.25 per cent and will only earn interest up to £1,500.

This will cost someone with £1,500 in the account after the first year around £12 a year in interest, not a great deal, but not ideal at this current time of low savings rates.

But for those who haven’t held a FlexDirect account before, or who are opening a new joint account having not shared one before, you can still lock in that last 5 per cent savings deal before it disappears. 

Nationwide say any FlexDirect accounts applied for prior to 1 May, this Friday, will still receive 5 per cent interest on balances of up to £2,500 for 12 months. 

Those who signed up for FlexDirect at any point after 1 May 2019 will continue to be paid 5 per cent interest until their deals run out.

Savers who do open an account before the start of May could earn around £125 in interest if they kept a full £2,500 in the account for a year. 

Apply a day or so later, and the maximum interest they could earn is around £30, less than a quarter, thanks to the maximum balance interest can be earned on being cut by £1,000 as well as the rate itself being cut by three-fifths.

Meanwhile, the best easy-access account at the moment, offered by Marcus Bank, pays 1.2 per cent, also around £30 interest on £2,500 in savings.

What else has been cut? 

Nationwide is the only bank account provider making cuts which new savers can escape, with Santander, Starling and TSB all making cuts that affect everyone.

Santander was one of the first banks this year to announce it was slashing in-credit interest on current accounts, with holders of its popular, and once very generous, 123 account seeing their rate reduced from 1.5 per cent to 1 per cent on 5 May. It is also capping its cashback offer at £15 a month.

Smartphone-only bank Starling is cutting in-credit interest on 18 May. 

Previously those with up to £2,000 in their accounts received 0.5 per cent, and those with up to £85,000 0.25 per cent, but everyone will now receive just 0.05 per cent.

And TSB is wielding the knife for the second time in 10 months, halving the interest rate paid to holders of its Classic Plus account with up to £1,500 in the bank from 3 per cent to 1.5 per cent. 

Last July it cut the rate from 5 per cent to 3 per cent.

Rachel Springall, from financial information site Moneyfacts, said: ‘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.’


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THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

NatWest’s Reward Silver Account offers a £175 switching incentive to new and existing customers as well as insurance cover for European travel. Customers can also earn rewards which can be redeemed as cash or gift cards.

NatWest

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

HSBC’s Advance Account offers £175 cash if you switch to it. The account comes with a £1,000 starting overdraft and 2.75% regular saver account. There is no monthly fee, however you must deposit £1,750 per month into the account.

Nationwide

Nationwide’s FlexDirect account comes with 5% interest on up to £2,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays

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