Money Insider: To TSB or not to TSB with a new account
Friday 14 March 2014
Barely a week after the details of the new M&S bank current account were published, TSB has joined the bank switching fray with its new Plus account, available from the end of March, paying a headline 5 per cent interest rate on credit balances.
The 5 per cent rate is restricted to balances up to a maximum of £2,000 and while there's no golden hello-type switching incentive (£100 seems to be the going rate these days) the credit interest feature is not a short-term introductory offer, so if you keep at least £2,000 in your account at all times you'll earn £80 per year after 20 per cent tax.
The existing TSB current account with the "enhance" feature will no longer be available to new customers, but currently enables account holders to earn interest on larger balances – the rates may be lower but higher net returns are possible, for example an average £5,000 balance earns interest at 3 per cent and delivers interest income of £120 per annum net of 20 per cent tax.
I've been crunching the numbers to see how this latest credit interest offer stacks up against the competition.
As you'd expect it depends on the average balance, but my calculations show that the new TSB Plus account ranks second behind Halifax Reward if you keep an average credit balance of £500; it comes out top for balances of £2,000; and it is fifth best based on an average balance of £5,000.
The monthly funding requirement is comparatively low at just £500, with many accounts looking for at least £750 to £1,000 to be paid in each month.
Unlike with the majority of high street bank accounts, you're not forced to switch across your direct debits when you open a TSB Plus account.
You are permitted to have a maximum of two accounts – this, combined with the non-requirement of direct debits, sets the loophole alarm bells ringing – so potentially TSB could see an influx of consumers opening two Plus accounts and earning 5 per cent on a combined £4,000 balance, viewing it as an alternative to poor-paying instant access savings accounts.
Perhaps TSB realises it will draw in a raft of new custom which then gives it an opportunity to woo these particular account openers with top customer service and encourage them to put stay as long-term current account customers?
The remaining features of the TSB Plus have been inherited from the old Lloyds current account tariff which is expensive when it comes to overdrafts or using your debit card overseas.
Overdraft interest is 19.94 per cent as well as a monthly £6 charge for an authorised overdraft - plus the buffer is only £10, leaving little room for error before charges kick in. By contrast the new M&S account announced last week comes with a far more palatable leeway of £100.
If you use the debit card for purchases overseas, you will pay 2.99 per cent non-sterling transaction fee on all purchases and cash advances and you'll also get stung by the £1 non-sterling fee for each and every card purchase abroad.
In summary – the credit interest is quite generous and the low monthly funding makes it more widely accessible. But the account still maintains the uncompetitive baggage from the old Lloyds era, meaning that unlike M&S Bank this account is less of an all-rounder and not one I'd plump for if you want a cheap overdraft or low-cost card transactions abroad.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
Best savings rates are not all they might seem
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Gold-plated pensions – the key to retirement freedom?
- 1 PlayStation and Xbox hacked by Lizard Squad
- 3 The Grace Dent Christmas Questionnaire
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Vagina canoe artist defends herself over ‘obscenity’ charges
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Alex Salmond has 'broken his word to the Scottish people' says Scottish Lib Dem leader
iJobs Money & Business
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens