The Co-operative Bank has launched its Current Account Plus - a bank account with a linked savings account - so how does it compare against some of the existing deals out there?
Linked current accounts allow you to transfer money to your savings account faster than would otherwise be possible - the general clearing cycle usually takes up to three working days - meaning your money starts earning interest sooner.
Such accounts can also be simpler to manage, as your finances are more centralised.
The Co-operative Bank offering
First let’s look at the current account part of the deal. The Co-op charges no monthly fee and comes with a £200 fee-free overdraft facility.
The bad news is that you have to pay a ‘monthly service charge’ of £20 if you exceed your overdraft limit. Worse, the bank account pays no credit interest whatsoever.
Like many of its other products, the Current Account Plus has an ethical flavour, with the bank promising to donate 1.25p for every £100 spent to the ‘Customers Who Care' campaign fund.
The donation size is extremely poor – you’d have to spend £8,000 for them to donate £1 – but the bank should nonetheless be commended for offering an ethical incentive that doesn’t coerce customers into debt (as ethical credit cards do).
Current account comparison
*Falls to 1% below base rate (currently 5%) on 30/04/2009
How the rival accounts compare
Alliance & Leicester’s Premier Direct bank account offers an impressive 8.5% credit interest on its current account. Sadly, it’s only available on the first £2,500 in the account (earning 0.1% on all higher amounts) and the rate falls after one year to 1% below the base rate, or 4%.
The account charges no interest on authorised overdrafts for the first year, after which time you’re charged 50p for every day you’re overdrawn, with a maximum monthly charge of £5.
The A&L Premier Direct offers amazing short term value, but comes with a lot of fine print that massively erodes the rates over time. That said, it is still a far better deal for customers than Co-op’s current account.
First Direct 1st Account
First Direct customers get an automatic £500 formal overdraft at account opening. The first £250 of your overdraft is interest free, while anything above that is charged at 12.9%.
Like the Co-op deal, the 1st Account pays no credit interest whatsoever. Also, if you want to avoid the £10 monthly fee, then you have to deposit at least £1,500 into the account every month – you also have to hold an additional First Direct product, but as we’re comparing a linked account that doesn’t apply here.
All in all, First Direct’s current account offers poor value compared to both the Co-op and A&L.
Linked savings account | AER | Maximum investment | Sweep facility |
A&L Plus Saver | 5.5% | £2 million | No |
First Direct Everyday e-saver | 5.0% | NA | Yes |
Co-Operative Bank Savings Plus | 4.5% | £1 million | No |
*4.75% on all amounts above £50,000
So what about the linked savings account?
The interest on the Co-op’s Savings Plus account tracks 0.5% below the Bank of England base rate, which is currently 5%, meaning you earn 4.5% at present.
Considering there are numerous instant access accounts out there paying over 6%, the deal isn’t very competitive, but on the upside it is guaranteed for as long as you have a Current Account Plus.
The account has a minimum deposit of just £1, and you can save anywhere up to £1 million.
Rival offerings are better
When you open an A&L Premier Direct current account, you are automatically given a PlusSaver account, which comes with a £2 million maximum investment and a 5.5% AER. But once again there’s a catch: The rate is only applicable for the first year and on the first £50,000, with all other savings earning 4.75% interest.
As for First Direct, the EveryDay e-Saver comes with a 5% rate and allows you to deposit unlimited sums of money. Unlike the other two offers, it comes with a nifty sweep facility, which automatically transfers any remaining cash from your current account so you don’t have to keep remembering to do so yourself.
Both these savings accounts are better than the Co-op’s at present, as they offer higher rates. But obviously that could change down the road, as the Co-op’s Current Account Plus is linked to the base rate.
So which is the best overall?
If you’re looking purely for best potential earnings, then A&L’s Premier Direct is easily the best deal – even once you factor in those fine print nasties that erode the rates over time.
But if you’re looking for a straightforward account that ‘does what it says on the tin’, then the Co-op deal is probably the winner.
As a final point, it’s worth noting that all three of these banks have a good reputation for customer service, ranking above the big four in a number of different surveys.
