TSB has become the latest bank to slash its current account interest rate.
The bank is cutting the interest rate on its 5% Classic Plus Current Account to 3% on balances up to £1,500 from 2 July.
The rate was the joint highest on the market along Nationwide’s FlexDirect account.
With the Classic Plus Current Account you need to pay in at least £500 a month, register for internet banking and paperless correspondence to get the headline rate.
The news comes after Tesco slashed the rate on its current account from 3% to 1% in February.
TSB is also bringing back its refer a friend scheme and will offer £75 to any of its current account customers who get someone they know to switch from their existing bank account to either TSB’s Classic or Classic Plus Current Account.
Craig Bundell, TSB’s director of personal current accounts, says: “Our Classic Plus remains one of the UK’s best current account as we continue to offer our customers the best ongoing current account interest rate available in the marketplace.
“Giving something back to our customers has always been important to us and so I’m delighted that we’re today also launching our popular refer a friend offer.
"Existing TSB current account customers can refer up to five friends so they could earn up to £375 if all five friends switch their bank accounts to us.”
The best buy current account is the Nationwide FlexDirect, which pays 5% interest on balances up to £2,500 for the first 12 months, but this then drops to 1%. There are no monthly fees, but you have to pay in at least £1,000 a month.
The Bank of Scotland Vantage account pays 1.5% interest on balances up to £5,000. Holders must pay £1,000 into the account each month, stay in credit and pay out at least two direct debits. To access this interest rate you must open a standard current account with the bank and request its Vantage add-on.
The Lloyds Bank Club Lloyds current account pays 1.5% interest on balances up to £5,000. To earn this rate of interest you must pay £1,500 into the account every month and have two direct debits set up.
Santander’s 123 Current Account pays 1.5% interest on balances up to £20,000. There is a £5 monthly fee, but you can also get cashback on household and utility bills. It requires £500 monthly minimum pay-in and two active direct debits.
Tesco’s current account pays 1% interest on balances up to £3,000 and also rewards debit card spending with Clubcard points.