08 February 2008
The current account war has intensified after Alliance & Leicester announced it is increasing the interest it pays new customers to 8.5 per cent.
People opening one of the group's Premier Direct and Premier 50 current accounts will receive returns of 8.5 per cent on credit balances during the first year, after which the interest rate will fall to one per cent below the Bank of England's base rate.
Alliance added that people who switch to one of the accounts will also benefit from an interest-free and fee-free overdraft for the first 12 months.
It will then revert to its new structure under which people are charged 50p a day, up to a maximum of £5 a month, for being in the red instead of interest.
The decision puts A&L at the top of the best-buy tables, surpassing the former leader Abbey, which paid interest of eight per cent on the first £2,500 for a year after the account is opened.
The move comes just days after HSBC announced its Bank Account Plus would be paying new customers eight percent on the first £1,000 they held in the account for the first 12 months.
Its account, which costs £12.95 a month and includes free annual travel insurance, also charges overdraft interest at eight per cent on up to £1,000, also for the first year.
Copyright © PA Business 2008