Lloyds and TSB go to war with new current accounts

Current accounts

Not to be outdone by TSB, Lloyds Bank has launched a souped-up current account.

The Club Lloyds account offers 4% tiered credit interest on balances between £4,000 and £5,000 maintained for 12 months, which could earn customers up to £196 net of tax a year.

The TSB Plus account, which launched on Sunday 30 March, pays 5% but only on balances up to £2,000.

Returning to the Lloyds Club account, balances between £2,000 and £3,999.99 will earn 2%, though this rate falls to just 1% on balances below £2,000.

The account, which can be opened and managed online, in branch and over the phone, will also give customers access to a mortgage rate reduction of 0.2% and a monthly saver account that pays 4% interest on savings up to £400 each month – paid monthly or annually.

Customers must pay in £1,500 and set up at least two direct debits into the account each month but anyone wanting to use the Club account but not as their main current account can access it for a £5 monthly fee.

The account comes with a £100 interest- and fee-free authorised overdraft (unlike the £10 buffer on offer with the TSB Plus account). Customers who exceed the limit will have until 3.30pm the next day to escape unauthorised overdraft fees kicking in.

The interest charged on authorised overdrafts greater than £100 is 19.94% AER and a £6 monthly usage fee will apply. But Platinum packaged account customers will pay a reduced rate of 17.28%; while Club Premier customers will pay 15.43%.

Unauthorised overdrafts will set you back £5 a day for transactions of between £10 and £25, and £10 a day for transactions of more than £25 – these fees are capped at a maximum of eight days.

Other perks of the account include up to 15% cashback on everyday spending and the choice of one 'lifestyle option' such as six free cinema tickets a year or an annual Gourmet Society membership.

Find the best interest rate current account for you

Rewarding loyalty

Philip Robinson, director of current accounts at Lloyds Bank, said: "We want to reward loyalty by offering a collective range of market leading rates across our products."

Andrew Hagger of money website Moneycomms.co.uk, said: "Overall the credit interest on offer is pretty decent but for existing Lloyds Vantage customers it's less attractive on smaller balances, where they currently pocket 1.5% up to £1,000 and 2% between £1,000 and £3,000 – so these customers will be less than impressed with the Club makeover."

He pointed out that while those who are able to keep a balance of £5,000 in the Club account for 12 months will earn interest of £160 a year, "for people with bigger credit balances, the 123 account from Santander paying 3% from £3,000 to £20,000 remains the stand out deal".

As for the 0.2% discount on new mortgage deals, he added: "It's a decent cut but you'd still be wise to get an independent mortgage broker to check that the discounted deal represents a good rate when compared against the whole market best-buy deals."

While he's "pleased to see the introduction of a £100 interest and fee-free buffer" he said that he was "disappointed at the high overdraft interest rate of 19.94% AER and £6 monthly usage fee".

"If you're not somebody that keeps much of a credit balance and are regularly overdrawn in excess of £100 there are cheaper bank account options to choose from."