Lloyds TSB ups current account rate

Lloyds TSB today launched the latest attack in the battle for current account customers by announcing it would pay up to 4.5% interest on account balances.

But the offer only applies to new customers and existing customers will be paid a lower rate of interest of 3.5%.

To qualify for the high rate, new customers or those who have taken out a Plus account since October 1 must have at least ?2,000 a month going into their account. Those paying in ?1,000 will receive 3.83% interest.

Existing customers who upgrade to a Plus account or already have one will be paid 3.5% interest if they credit their account with ?2,000 a month, up from 3.2% previously. If they pay in ?1,000 a month they will get 2.83%

The group justified its two-tier pricing strategy by saying it offered the best current account interest rate on the high street.

David Gagie, head of consumer lending and current accounts, said: "Existing customers who upgraded to a Plus account have had the benefit of a higher rate since the beginning of this year.

"We are offering a promotional offer to new customers until the end of 2004, but existing customers still get a fantastic deal."

Rebecca Fearnley, principal researcher at consumer magazine Which?, said: "It is great to see one of the big banks offering much better rates.

"It would be preferable to see them offer it to all their customers and if I was an existing customer I would feel pretty miffed about it.

"We would hope banks would reward loyalty rather than the other way round."

Halifax launched the current account war in January 2001 when it announced it would pay interest of 4%, or 2% below the Bank of England base rate, when most high street banks only offered 0.1%.

Halifax's current rate of 2.53%, which is dependent on people paying at least ?1,000 a month into their account, is now well below the Lloyds offer.