M&S offers current account customers 6% savings rate

7 January 2015

M&S Bank current account customers can earn 6% AER on their savings through a new linked Monthly Savings Account from Thursday 8 January.

They can save between £25 and £250 a month and can earn up to £78.31 net of basic-rate tax after 12 months, if they invest the maximum.

No withdrawals are permitted from the savings account during the year but deposits don't have to made every month and any unused portion of the monthly limit of £250 can be carried over into subsequent months.

If the customer already has an M&S Bank Everyday Savings Account, which pays a preferential rate of 0.75% AER, the annual Monthly Saver balance will be transferred into it. If they don't, the annual balance and interest from the Monthly Saver will be credited to their M&S bank account.

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At this point, personal finance expert Andrew Hagger, says customers will have a choice to make in terms of what they do with their savings, "perhaps selecting a competitive savings bond or Isa as a home for their lump sum or alternatively feeding it back into the M&S current account to take advantage of 6% via monthly savings in year two," he suggests.

M&S Bank isn't the only current account provider to offer savers appealing rates through linked accounts. First Direct gives its 1st Account customers access to a 6% rate too, through its Regular Saver account.

However, while there's no minimum monthly amount that has to be paid into the M&S current account to get access to the 6% savings rate, First Direct customers have to commit to pay in £100 a month to their current account, or they face a £10 monthly charge.

Hagger also points out that the £78.31 net interest earned on paying the maximum £250 a month into the M&S Monthly Savings Account is bettered by two other providers when compared to the interest paid on a £3,000 current account balance.

Nationwide's FlexDirect current account also offers a linked savings account, but it includes a first-year bonus rate of 5% AER that slumps to 1% AER from the second year on.

The TSB Classic Plus current account alone would yield an annual return of £80 for customers who are always in the black, paying 5% in-credit interest on the first £2,000. However, Hagger says that this seemingly attractive rate can be overshadowed by the high cost of authorised borrowing and debit card use abroad.

Popular choice

Hagger said: "Current accounts are increasingly becoming the best way to access high-rate savings accounts and if you've got a balance in excess of £3,000 and know you'll always remain in the black then Santander 123 and Lloyds Bank (Club Lloyds) will remain a popular choice.

"However, if your balance dips into the red from time to time, the high overdraft charges will take the shine off these in credit earnings."

He added: "Lump sum current account credit balances offer the flexibility of being able to access your cash instantly. However, there are a couple of advantages of a separate monthly saver – namely that your savings don't get muddled up with your everyday spending plus you can clearly track your savings balance and see it grow month on month."

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