The new 'Club Lloyds' bank account could pay customers as much as £160 a year in interest
The real battle on savings rates appears to have moved to current accounts. Lloyds, Britain’s biggest bank, will launch a new “Club Lloyds” account on Tuesday (March 31) that will “reward customer loyalty and everyday banking”.
Rates on deposit accounts have become dismal and banks have spied an opportunity to attract new customers to take current accounts, and use them as a springboard to sell lucrative other products. They reel in new customers with the offer of high income on current account deposits.
“Club Lloyds” will pay tiered interest rates on balances up to £5,000, offering customers the chance to earn up to £160 a year (after deducting 20pc tax).
One per cent will be given on balances from £1 to £1,999.99, 2pc will be paid on any amount from £2,000 to £3,999.99 and the top rate of 4pc will be paid on balances of £4,000 to £5,000.
The current account will be available to new and existing Lloyds customers, meaning those who already bank with Lloyds can transfer their account to make the most of the better rates on offer.
Clydesdale and Yorkshire Banks match Lloyds' 'Club' interest rate of 4pc, but again on smaller account balances of up to £3,000.
Santander's popular 123 current account gives customers up to 3pc interest on balances up to £20,000, and account-holders can access an exclusive rate of 2.3pc on the bank's best-buy Isa .
Lloyds’ new current account comes with extra perks. Customers will have access to a Lloyds’ Monthly Saver account, paying 4pc on savings up to £400 a month. A mortgage rate reduction of 0.2pc will be available to account holders, and customers can choose from a choice of benefits including six cinema tickets per year, an annual magazine subscription or a restaurant discount card.
To top it off, Club account holders will get a £100 interest and fee-free planned overdraft.
Alongside the launch of the new current account, Lloyds is also making changes to its “Vantage” current account, which pays up to 3pc on balances up to £5,000. From July, the interest rate will drop to a maximum of 1.5pc for existing account-holders, while the account will be closed to new applicants from March 31. Lloyds is encouraging customers to switch from this account to Club when it becomes available.
There are three important requirements to bear in mind before opening a Club account. Customers must pay in at least £1,500 to the account each month (quite high if you compare this with other providers’ monthly deposit requirements), pay a minimum of two direct debits from the account per month, and use Club Lloyds as their main banking account, or a £5 monthly fee will be payable.
Lloyds’ new offering is welcome news for those hoping to get the most out of their everyday banking. The current account is the best on the market for interest, allowing account-holders to earn up to £160 each year, while FlexDirect customers despite receiving a higher rate of interest will earn £100, and for the first year only.
Andrew Hagger, a financial products analyst at MoneyComms.co.uk, said that Lloyds was upping its game with the new account, likely due to the “potential threat from Tesco Bank and Virgin Money, with their new bank account launches surely just a few months away”.
The high rate of interest, and the added perks on the account, including the discounted mortgage rate and access to its monthly saver account, is to encourage customers to open up a number of products with the bank.
With Lloyds split from TSB as of last September after the Lloyds Group was forced by European law to get rid of some of its customers for the sake of competition the bank has been given permission to attract new customers and launch competitive products.