Starling bank slashes current account interest rates
If you bank with Starling, you'll soon earn a lot less interest
Starling customers that keep money in their current accounts will soon earn less interest on their balance.
From 18th May 2020, interest rates on all balances will drop to 0.05% AER.
Previously, Starling offered 0.5% interest on balances up to £2,000. For those keeping more money in their current account, balances above this (up to £85k) earned 0.25% interest.
Why has Starling made this change?
As justification, Starling is claiming that they are ‘one of the few banks that pay interest on credit balances’. That’s true, but it was also the reason that many people chose Starling over their main competitors. Now, Starling’s unique selling point may not be valuable enough to feature as a deciding factor.
The company goes on to say that the higher interest rates were no longer sustainable, with the Bank of England lowering the base rate in response to COVID-19.
How did customers find out?
Even if you’re an existing Starling customer, you might have missed this announcement. Customers were informed by email, labelled ‘An update to our terms and conditions’.
These kinds of emails are so frequent and vague that there’s a chance you might delete without opening.
The announcement was made on 15th March but was not accompanied by any information through social media accounts. It’s a change that’s been made on the quiet, and unless Starling already has your email address you’re unlikely to have been made aware.
What might this mean for Starling?
As Starling has rightly mentioned, they are one of a small number of banks to offer credit interest at all. If you want a current account that pays you for your custom, this might still be a selling point.
If you’re sitting on the fence, trying to choose between Starling and competitors like Monzo, then this new interest rate might not be high enough to actually swing your decision. If you’re choosing a bank, you might look more into other features on offer.
How significant is this interest rate change?
Previously, if you kept a static £2,000 in your current account, you’d earn £8 per year in interest. This would drop to £1 per year, after the interest rate change. For most people, this change will not have a significant impact.
A current account is usually a place for small amounts of money, with just enough sitting around to pay essential bills. If you have more money, spare every month, you should keep it in a savings account.
If you were using your Starling account for your savings, this may be a good time to move those funds somewhere more permanent.
If you’re making the most of your money, you can benefit from interest elsewhere. If you were using your Starling account for your savings, this may be a good time to move those funds somewhere more permanent.
Though this Starling bank interest rate change may not be good news, it’s not something that the average customer needs to worry about. It’s simply something of which to be aware.