The easy-access rate offers 0.7% interest but has charges.
Since its launch, the finance app Chip has regularly offered higher interest rates than most, if not all, providers.
Replacing the popular Chip+1 account, the latest account launched to existing customers in late August and will be open to all in mid-September. Again, it’s promising a market-beating rate.
In fact, Chip’s own publicity calls it “The best easy-access savings rate. The top of the table. The cream of the crop. Numero uno.”
That certainly sounds good, but should you move your money? Here’s my analysis.
What does Chip’s new savings account pay?
You’ll be able to earn 0.7% AER on up to £30,000 saved in the account. Chip says this limit could be increased, and I’ll update here if it is.
This is a better rate than the next closest easy-access account (at the time of writing 0.65% from Tandem). And unlike the Chip+1 account you’ll earn compound interest – i.e. interest will also earn interest.
However, this new savings option is only available to users on the ChipAI or ChipX plans. Both of these come with a fee every 28 days (£1.50 and £3 respectively). Factor that fee in and the real interest rate is much lower.
** UPDATE NOVEMBER 2021: ChipLite members (the free option) can save £2,000 in the new account and earn interest **
If you’re on the free ChipLite tier you won’t be able to open the account.
How the fee impacts the interest you earn
As you can see from the table below, that when you add in the £1.50 fee for ChipAI (£19.50 a year), you’ll earn less money with this new Chip account than you would with the Tandem easy access account paying 0.65%.
In fact, you need at least £2,786 in the account before the interest earned wipes out the fee over a 12 month period – and you’ll still be down £18 compared to stashing the cash with Tandem.
|Chip’s 0.7% account||Tandem’s 0.65% account|
|Amount saved||Interest earned||Total return after fee||Interest earned|
There’s also a much higher limit with Tandem of £250,000 – though with both that and the new Chip account you’re only protected by the Financial Services Compensation Scheme up to £85,000.
Of course, the fee isn’t just about the savings account. For that £1.50 every 28 days you also get interest up to £10k if you already have Chip+1 and access to the automated savings feature.
The latter is what I first loved about Chip, and it really can help you squirrel money away on a regular basis. However, the app Plum offers the exact same service for free!
The new account vs Chip+1
Though the Chip+1 account closes to new customers on 31 August, those who have already signed up for it will continue to get up to 1.25% – for the time being at least.
Despite the high rate (in comparison to elsewhere), Chip+1 isn’t perfect and there are limits to this account. For a start, it’s capped at savings of £10,000, and those on ChipLite only earn on the first £2,000. To earn on balances between £2k and £10k you pay those same fees as detailed above.
So does the new account beat this if you’ve more to save?
Well, the free ChipLite account will earn you £25 interest if you have the full £2,000 saved in Chip+1. With the fee, you’d need £6,356 in the new 0.7% account to match that total. So Chip+1 wins on pots under £2,000.
But for amounts above this, as the table above showed, Tandem’s 0.65% always beats the new Chip account. So it’s probably better to compare Chip+1 to Tandem instead.
Savings of between £2,000 and £5,250 Chip+1 effectively earn less than 0.65%. Beyond this total, Chip+1 will beat Tandem – though only for another £4,750 until the cap.
Of course, the Tandem account could drop or be beaten elsewhere, so these figures are purely for what is on offer now.
How other savings accounts compare
These accounts from Chip and the Tandem aren’t the only options for your money.
The highest paying option is actually via a current account. Virgin Money’s M Plus current account offers 2.02% on balances of up to £1,000 – and you can apply for more than one of these.
Fixed-rate accounts have also been on a steep increase. The best is back with Tandem (though this can change daily) with a rate of 1.41%. You do have to lock your money away for 12 months though to get this rate.
You can get updates on the latest savings accounts here.
Should you get the new Chip account?
If you’re already paying for the ChipAI or ChipX tiers – perhaps because you want to earn more on up to £10k or would rather use the auto savings here than the free alternative with Plum, then this is a good account for any overflow cash (above £10k).
But for anyone else looking for a top rate for their savings, those fees cut down what you’ll earn and I’d recommend instead any free account which beats those rates.
How to get the new Chip savings account?
Chip is an app-only product, so you need to have a smartphone to sign up and access the account.
Though to start it’s only for existing Chip customers, it’ll be available to all by mid-September. The account will appear as an option in the “accounts” tab of the app. Once you’ve opened it you can transfer in up to £5,000 a time, five times a day.
Once the account is publically launched you’ll also be able to put auto-savings in this account, which is well worth doing if you use the AI feature.
Is your money safe?
As mentioned the account is FSCS protected, though since it’s run by Allica Bank, you need to take into account any funds saved separately with them towards the overall £85,000 protection limit.