HSBC cuts interest payments on current account

Bank Account Plus customers will no longer receive interest payments, despite paying £12.95 a month for the account

HSBC dealt its packaged account customers a blow today when it said it would no longer pay interest on the current account.

Consumers previously received returns of 2% on the first £1,000 they held in the group’s Bank Account Plus, which costs £12.95 a month but includes a range of benefits.

But HSBC is now cutting the interest it pays on the account to 0%, regardless of how much money consumers have in it.

A HSBC spokesman said: “The HSBC Plus no longer offers credit interest, but it does provide preferential rates for both borrowing and saving, including offering customers the option to save up to £250 per month in our regular savings account and earn 10% AER.”

Louise Bond, personal finance manager at uSwitch.com, said: “This is pretty disappointing as the packaged deal costs consumers £146.40 per year.

“Previously these customers received 2% on balances of up to £1,000, which could have earned them anything up to £20 per year in interest.”

But she added: “The HSBC Bank Account Plus is a packaged account offering benefits such as travel insurance, breakdown cover, life cover and identity theft protection. If all of these benefits are utilised, it could still be a good deal for some people.”

The move by HSBC comes as Barclays increases its overdraft rates by up to 4% on several of its current accounts.

Eight out of the 12 current accounts the group offers will have their overdraft rates increased from today, while three are being kept on hold and one is being reduced by 1%.

Nationwide last week also raised its authorised and unauthorised overdraft rates by 1% to 18.9%.

The moves prompted concerns that other current account providers would now follow suit and raise the interest they charge people who are in the red.

However, Spanish banking giant Santander has bucked the recent trend by increasing the interest it pays on current accounts offered by its two subsidiaries, Abbey and Alliance & Leicester, by between 1% and 6% for new customers from today.

The rate is fixed for one year on balances of up to £2,500, after which it will fall to 1%.