Yahoo Finance JP Morgan Chase launches digital bank account paying 5pc interest – but there's a catch
American banking giant JP Morgan has launched its first ever current account to British consumers.
The account offers 5pc interest to customers, the highest rate available on the market today. However, this interest rate will only apply to "small change round-ups". This is when a customer makes a purchase using their debit card and the amount deducted from the account is rounded up to the nearest pound.
The difference is then deposited in a separate account where it will earn interest at 5pc for 12 months.
The fee-free "Chase" current account has launched to consumers today and is the first new account to be launched in nearly seven months.
While this is the highest interest rate currently available to British banking customers, cash returns are likely to be modest.
If a shopper made five purchases a day that were all rounded up by 2p to the nearest pound, they would have saved about £3.10 a month. Over the course of a year, at 5pc interest, they would have saved a total of £37.20, earning an additional 86p in interest.
To earn this amount on an easy-access savings account from HSBC or Nationwide for example, at 0.01pc, over the same period a customer would need to deposit £8,600.
JP Morgan's account also offers 1pc cashback on debit card spends for 12 months. Cashback is included on groceries, entertainment, homewares, electronics, flights and holidays.
The card can also be used overseas without incurring any fees, including for withdrawals at cash machines abroad.
Analysts said the arrival of the Chase account would provide a shot in the arm to the stagnant current account market. Three years ago another American investment bank, Goldman Sachs, launched a savings account in Britain which boosted competition for savers.
Many interest-paying current accounts have disappeared over the past year, although there are still a handful of cards that offer perks to customers.
Virgin Money's M Plus account pays customers 2pc interest on balances up to £1,000. Elsewhere, Nationwide pays 1.98pc on balances up to £1,500 on its FlexDirect account.
Elsewhere, the TSB Spend and Save account gives shoppers up to £5 cashback a month for six months, when making 30 or more debit card payments.
Rachel Springall of Moneyfacts, a financial analyst, said: “Banking customers looking to switch may wish to compare details carefully, as while there have been more upfront cash offers appearing in recent weeks, it’s the overall package which needs to be assessed to ensure it’s the right choice.”
