Starling Bank to scrap 3.25% current account interest worth up to £162.50 per year from February – here’s why
- Starling pays 3.25% on balances up to £5,000 – this will stop from February 10, 2025
Starling Bank is scrapping its popular interest rate feature on current accounts, This is Money can reveal.
The digital bank will stop paying 3.25 percent interest on their current account to all customers from February 10, 2025 – and will eliminate this perk completely.
Currently, Starling current account customers receive high interest on their current account balances up to £5,000.
Starling increased the interest rate on its current account just over a year ago, having paid 0.05 percent since 2017.
If there was a current account balance of £5,000 and interest rates remained at 3.25 per cent, customers could earn £162.50 in a year.
Demolished: Starling will stop paying 3.25% interest on current account balances to current account customers from February 2025
A spokesperson for Starling Bank said: ‘We are continuously monitoring our products and have made the decision to abolish interest on current accounts from 10 February 2021.
‘In recent weeks we have informed all customers of the new current account conditions in Starling.
“Customers will still benefit from free publishing abroad and 24/7 customer service.”
New and existing customers with a single or joint current account will continue to receive interest on balances up to £5,000 until February 10, 2025.
It comes as This is Money has revealed that Starling will launch an easy-access 4 per cent account linked to its current account from the end of this month.
This is Money understands that the first customers were able to open the easy saver account this week and it will be rolled out to more customers over the course of the week.
The easy-access account will only be available to Starling’s sole current account customers at launch, and not to joint account holders.
Over the summer, digital rival Chase eliminated its 1 percent checking account interest rate, trading it for a temporary 1 percent increase on its easy-access account.
James Blower, president of Savings Guru, said at the time: “Paying interest on checking accounts will become less profitable for Chase in a declining interest rate environment.
‘This is a cheap way to attract additional savings now, but pay a lower rate when the bonus expires.’
Most banks don’t pay interest on current accounts, so removing this attractive feature takes some of the shine off Starling as a disruptive digital challenger.
Where else can you get more interest on current account balances?
Starling has the most attractive interest rate on the market for larger current account balances.
Nationwide’s FlexDirect account pays 5 percent interest on current account balances established during the first twelve months at account opening, but only up to £1,500.
Customers who keep that balance in their account all the time can earn up to £75 over the year.
The rate drops to 1 percent when the twelve-month introductory period is over.
Customers must deposit a minimum of £1,000 per month into the FlexDirect account to receive the 5 per cent credit interest and later the 1 per cent interest.
Digital Bank Kroo also offers interest on current account balances.
Kroo pays 3.65 percent on the current account balances. This rate is 1.1 percent below the Bank of England’s base rate, which is currently 4.75 percent.
For example, if the base interest rate were lowered to 4.5 percent, Kroo’s lending rate would fall to 3.4 percent.
Kroo can also increase the margin it follows below the base rate at any time.
There is no minimum monthly deposit required to receive overdraft interest.
Santander’s Edge Up current account comes with 3 percent interest on current account balances up to £25,000.
But some of the interest will be eaten up by the £5 monthly charge on the account.
The Edge Up account also comes with 1 percent cashback on essential expenses such as shopping and travel (capped at £15 per month) and 1 percent cashback on household bills paid by direct debit.
Santander is currently paying a £150 switching bonus to customers who transfer their current account to the Edge Up current account.
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