The checking account you pay! Starling Bank will pay 3.25% interest on balances up to £5,000
- Starting tomorrow, Starling will pay 3.25% on the current account balance
- Current account interest applies to balances up to €5,000
- You can earn approximately €13.54 per month in interest
Starling current account customers can earn £13.54 a month on cash parked at the digital bank from tomorrow.
It pays customers 3.25 percent interest on current account balances up to £5,000.
Starling will pay 3.25 percent interest on money held in personal and joint accounts, and on linked Kite debit cards for children.
Personal account holders can receive €162.50 per year, or €325 if you have a joint account, on the top balance of €5,000.
Starling bank pays customers 3.25% interest on current account balances
The rate is automatically applied and paid monthly. Balances up to £85,000 are protected by the Financial Services Compensation Scheme.
Starling claims that most of their customers will benefit from interest on their entire current account balance, as 94 percent have £5,000 or less in their account.
Now Starling has called on the big banks to follow suit.
There are currently other banks that pay interest on overdrafts, including Nationwide, which pays 5 per cent on balances up to £1,500. But this rate only applies for twelve months, after which the rate drops to just 1 percent.
Lesser-known Digital Bank Kroo pays 4.35 percent on current account balances up to £85,000.
But from October, Kroo will apply a base interest rate tracker to its interest rate, which is 0.9 percent below the base rate. This interest rate could therefore decrease if the interest rate changes.
Andrew Hagger, a personal finance expert and founder of the website MoneyComms, believes the motivation behind Starling’s move is twofold.
He says: ‘Starling wants to reward and retain existing customers, but also wants to attract new customers through the credit interest rate.
‘Although there is no cash offer to switch, other bank customers may find this deal attractive enough to switch to Starling, especially if their own bank does not pay loan interest.’
The most recent quarterly figures from the Current Account Switching Service, published in July, showed a decline in Starling’s net number of switching customers.
In the first three months of 2023, just 299 customers switched from other banks to open a current account with Starling, compared to 1,810 in the last three months of 2022.
So the move to pay interest on current accounts may be enough to reclaim some customers, while incentivizing current customers not to switch.