M&S slashes interest rate on top savings account from 5% to 2.75%
MARKS & Spencer has slashed the interest rate on its top savings account from 5 to 2.75 per cent.
The account was the last regular savings account paying the 5 per cent interest, after HSBC and First Direct made similar rate cuts last month.
It's another blow to savers, who've seen the average interest on regular savings accounts drop from 2.64 to 2.24 per cent since January, according to comparison site Moneyfacts.
Now, savers who wish to earn 5 per cent interest on their cash have to open a high interest current account, with Nationwide Building Society offering the rate on its FlexDirect account.
Regular savings accounts can be a good option for those trying to get into the habit of saving regularly, but if you require flexibility then a high interest current account may be a better option for you.
Following the M&S' rate cut, the top regular savings accounts are currently offered by Saffron Building Society and Monmouthshire Building Society with fixed rates of 3 per cent.
Regular saving accounts:
- - You'll get 3 per cent on monthly deposits of up to £300 over 12 months.
- - You'll get 3 per cent on monthly deposits of up to £250 over 12 months.
In comparison, the M&S Monthly Saver requires you to deposit between £25 and £250 a month for 12 months.
If you don't pay in the maximum amount each month, you can carry over the allowance and pay in more later.
Once the 12 months is up, the balance and interest is given to you as a lump sum.
Depending on how much you save each month, you'd earn between £4.47 and £44.69 in interest after a year.
Just keep in mind that you'll lose the interest if you make any cash withdrawals before the year is up, so carefully consider this before you sign up.
To open the account, you'll also need to switch your current account to the bank and have two direct debits.
If you already have an M&S Monthly Saver account, you'll continue to receive the 5 per cent interest rate for the remainder of your 12-month deal.
How to switch bank account
NOT sure how it works? Here's all you need to know and what you should check before:
- Under the Current Account Switching Service, swapping banks should take seven working days. That includes all your payments, direct debits and standing orders being moved too. Just open your new account and then ask your new provider to close your old account using the switch service.
- Make sure you are eligible. Most accounts have certain requirements, such as paying in a minimum amount of cash each month.
- Watch your overdraft. Check your new bank will offer you the same limit — and does not have higher costs for using it.
Rachel Springall, finance expert at Moneyfacts, said savings rates have been "on a downward trend" this year.
She added: "Providers are uncomfortable offering lucrative interest rates to savers, including guaranteed fixed interest rates applied on regular savings accounts.
"Those looking to save towards Christmas 2020, or simply to get into the savings habit for other goals, will feel disheartened, but this outcome seemed inevitable given the economic uncertainty.
"If consumers are looking for a top rate to save for 12 months, then they will find Monmouthshire Building Society and Saffron Building Society paying 3 per cent fixed, and Kent Reliance paying 3 per cent variable."
NatWest and sister bank Royal Bank of Scotland are scrapping cashback on bills for roughly 1.7million customers next year.
While in February, Nationwide axed debit and credit card cashback scheme for 400,000 customers
Looking for the best savings account for you? Check out our round-up here.