HSBC scraps current account interest

HSBC dealt its packaged account customers a blow today when it emerged the group will no longer pay interest on the current account.

Consumers previously received returns of 2 per cent on the first £1,000 they held in the group's Bank Account Plus, which costs £12.95 a month but includes a range of benefits such as free travel insurance, breakdown cover and identity theft protection.

But HSBC is now cutting the interest it pays on the account to 0 per cent, regardless of how much money consumers have in it.

An HSBC spokesman said: "The HSBC Plus no longer offers credit interest, but it does provide preferential rates for both borrowing and saving, including offering customers the option to save up to £250 per month in our regular savings account and earn 10 per cent AER."

Louise Bond, personal finance manager at uSwitch.com, said: "This is pretty disappointing as the packaged deal costs consumers £146.40 per year.

"Previously, these customers received 2% on balances of up to £1,000 which could have earned them anything up to £20 per year in interest."

But she added: "The HSBC Bank Account Plus is a packaged account, offering benefits such as travel insurance, breakdown cover, life cover and identity theft protection. If all of these benefits are utilised, it could still be a good deal for some people."

The move by HSBC comes as Barclays increases its overdraft rates by up to 4% on a number of its current accounts.

Eight out of the 12 current accounts the group offers will have their overdraft rates increased from today, while three are being kept on hold and one is being reduced by 1 per cent.

Nationwide last week also raised its authorised and unauthorised overdraft rates by 1 per cent to 18.9 per cent.

The moves prompted concerns that other current account providers would now follow suit and also hike the interest they charge people who are in the red.

However, Spanish banking giant Santander has bucked the recent trend for worsening current account rates by increasing the interest it pays on current accounts offered by its two subsidiaries, Abbey and Alliance and Leicester, by 1 per cent to 6 per cent for new customers from today.

The rate is fixed for one year on balances of up to £2,500, after which it will fall to 1 per cent.