MAJOR online bank with millions of customers to make huge change in just two weeks
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A MAJOR online bank with millions of customers will make a huge change in just a matter of weeks.
Monzo Bank has slashed the interest rates on one of its savings accounts.
It comes after the Monetary Policy Committee (MPC), the BoE’s rate-setters reduced the base rate from 4.75% to 4.5% this week.
The base rate is used by lenders to determine the interest rates offered to customers on savings and borrowing costs.
A base rate cut can mean that mortgage rates are lowered, which is good news for homeowners.
But savers can be left with the short end of the stick as the interest rate they earn on their savings can also drop.
As the base rate falls, some savings providers, including Monzo, have chosen to lower the interest rates on some savings accounts.
Monzo said it would lower the inter test on its Personal Instant Access Savings Pots from 3.60% AER to 3.35% AER.
AER, or Annual Equivalent Rate, is used to show you what you could earn from a savings account over a year.
A lower AER means you will have less money in your savings account over a year because it indicates a lower rate of interest being paid on your savings.
Monzo, which only operates online, said it would make the changes automatically on February 22 2025.
It told customers to check its app and look for other types of Savings Pots they have available.
Customers could move their money elsewhere at any time.
Monzo Personal Instant Access Savings Pots are a way to save money while still being able to withdraw it whenever you need it.
They’re used by customers as a flexible option for saving towards short-term goals, like building an emergency fund or saving for a holiday.
Monzo is not the only bank to make changes after the rate cut this week.
OTHER BANK CHANGES
Barclaycard, a subsidiary of Barclays that caters to over 20million customers, is lowering the interest rates applied to its credit cards across the board, The Sun can reveal.
This means all credit card customers will soon benefit from a 0.25% reduction in their purchase interest rates, as well as the repayment rates applied to cash withdrawals.
For example, if you hold a Barclaycard Platinum and are currently paying 24.9% interest on your purchases, this rate will decrease to 24.65% from your next statement period.
With a 0.25% reduction in the base rate, customers can expect to save approximately 21p per month in interest for every £1000 of their balance.
The interest rate applied to cash withdrawals will also be reduced by the same margin.
However, it’s important to note that customers who withdraw cash using their Barclaycard will still incur a separate fee of 2.99% (or a minimum charge of £2.99) for each withdrawal.
This separate fee remains unchanged.
Types of savings accounts
THERE are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we’ve rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.