The current account that pays you! Starling Bank to dish out 3.25% interest on balances up to £5,000
- Starling will pay 3.25% on current account balances from tomorrow
- Current account interest is on balances up to £5,000
- You could earn around £13.54 a month in interest
Starling Bank customers with current accounts can now earn £13.54 per month in interest on their cash holdings with the digital bank starting from tomorrow.
Starling will pay 3.25% interest on current account balances up to £5,000.
This interest rate is applicable to personal and joint accounts, as well as children’s Kite debit cards.
As a personal account holder, you could earn £162.50 annually, while joint account holders could earn £325 on the top £5,000 balance.
Starling bank is paying customers 3.25% interest on current account balances
The interest rate is automatically applied and paid monthly. Balances up to £85,000 are protected by the Financial Services Compensation Scheme.
Starling claims that the majority of their customers will benefit from the interest on their entire current account balance, as 94% hold £5,000 or less in their account.
Starling is now calling on traditional banks to follow suit.
Currently, Nationwide is one of the banks offering interest on current account balances, providing 5% on balances up to £1,500. However, this rate is only valid for 12 months and drops to 1% afterward.
Digital bank Kroo, which is lesser known, offers 4.35% on current account balances up to £85,000.
Starting from October, Kroo will implement a base rate tracker, which tracks 0.9% below the base rate. Therefore, the interest rate may decrease if the base rate changes.
According to Andrew Hagger, a personal finance expert and founder of the MoneyComms website, Starling’s move has a dual purpose.
Hagger states: “Starling aims to reward and retain existing customers while attracting new business through the interest rate.”
He further adds: “While they are not offering a cash bribe for switching, customers of other banks may find this deal enticing enough to move to Starling, especially if their current bank does not offer credit interest.”
The latest data from the quarterly Current Account Switching Service shows a decline in the number of customers switching to Starling. In the first three months of 2023, only 299 customers switched to Starling from other banks, compared to 1,810 in the previous three months of 2022.
Therefore, providing interest on current account balances may help Starling regain some customers and incentivize existing customers not to switch to other banks.
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